The University of Queensland

Faculty of Business, Economics and Law

School of Economics

GENDER INEQUALITY AND SOCIOECONOMIC DEVELOPMENT

An ECON7920 Economic Project submitted to the school of Economics, The

University of Queensland, in partial fulfilment of the requirement for the degree of
Master of Development Economics (Advanced)

By: RYAN BARCLAY EDWARDS

Bachelor of Economics International Trade and Finance Specialization
Bachelor of Business Management International Business Major

Supervisor: DR. FABRIZIO CARMIGNANI

February 2010

ACKNOWLEDGEMENTS

I would like to take this opportunity to extend my deepest thanks and appreciation to those
who have assisted and contributed -- directly and indirectly -- to the completion of this
economic project.

From the School of Economics I would like to thank Alan Duhs, Jason Potts, Mohammad
Alauddin, and Fabrizio Carmignani for their invaluable assistance throughout the years.
These four special staff members have surpassed any preconceived teaching expectations
and continue to raise the bar. They opened my mind and changed the way I approach
economic problems. I would also like to thank Sukhan Jackson for her valuable research
advice and teaching. Together they have all helped me greatly improved my writing style,
critical thinking and working knowledge beyond what I ever deemed possible. They are a
credit to the school and economics profession.

I would like to express my extreme gratitude to my family for their unconditional love and
support -- especially my father who assisted in converting my language back into proper
English.

Thanks to my close friends Alex Brown, Carl Bond, Dan Young and Dennis McGregor for
their constant encouragement, support and tolerance throughout my study.

Thanks to Carly Stephan, Craig Wilson and Vladimir Pacheco for introducing me to the
industry, constantly teaching me, and being loyal colleagues and friends.

I am especially obliged to my supervisor, who has been so amazing that he needs two
mentions. It was Fabrizio Carmignanis feedback, promptness, tolerance, knowledge,
wisdom, integrity, professionalism, dedication, understanding and genuine care for his
students which built this project over the last year through his priceless teaching, insights,
discussions and supervision.

I dedicate this project to this person I missed most throughout its duration.

Thank you Michelle, for you are my source of strength and inspiration.

Te amo carino.

Together we can achieve anything.

DECLARATION

I declare that the work presented in this project is, to the best of my knowledge and belief,
original and my own work, except as acknowledged in the text, and that material has not
been submitted, whither in whole or in party, for a degree at The University of Queensland
or any other university.

..
Ryan Barclay Edwards
11 / 2 / 2009

ABSTRACT

Gender equality is a key issue in development and gender mainstreaming is now common practice.
In the past, gender equality has been a concern for reasons of human rights, but I show how it is a
concern of economic necessity. The paper examines the direct effect that gender inequality has on
economic growth and social development, and then the indirect effect that is transmitted through
institutions and governance. Firstly, I find that while gender inequality can help growth through the
creation of investment incentives and lessened likelihood of political conflict, these circumstances
are myopic and uncommon. Conversely, the negative human capital, fertility, income and
productivity effects of gender inequality apply universally and gender inequality is harmful to longterm growth. Secondly, in all indicators examined, gender inequality is a severe obstacle to social
development, but addressing gender inequality will never alone be sufficient for poverty reduction. I
also find evidence that Islam and ethic fractionalization are not always consistent with high levels of
gender inequality, nor are they binding barriers to social development. Thirdly, institutions and
improved governance assists economic and social development. After addressing a number of
pressing concerns in the literature, I present clear evidence that women in parliament are strongly
associated with lowered corruption, and a number of other key variables. We find that in all three
areas, there is not an efficiency/equity trade off with respect to gender, and equality is actually
economically efficient with respect to long-term economic growth and social development. Policy
implications are considered with respect to the current direction of international policy, and some
recommendations are made based on the projects major findings.

Keywords: gender, gender inequality, gender gap, social development, education, health, institutions,
corruption, productivity, economic growth, economic development, socioeconomic development,
discrimination, efficiency, equity

GENDER INEQUALITY
AND

SOCIOECONOMIC DEVELOPMENT

TABLE OF CONTENTS
Acknowledgements ............................................................................................................... 2
Declaration ............................................................................................................................ 4
Abstract ................................................................................................................................. 5

Table of Contents .................................................................................................................... 7

List of Figures.......................................................................................................................... 9
List of Tables ......................................................................................................................... 10
List of Acronyms ................................................................................................................... 11

Chapter One: Introduction .................................................................................................. 12

1.0. Introduction .................................................................................................................. 13
1.1. Recent Trends In Gender ............................................................................................. 17
1.2. Key Definitions and Concepts ..................................................................................... 20
1.3. Model Of Gender Inequality in Development ............................................................. 23
1.4. Assumptions, Limitations and Data Sourcing ............................................................. 25
1.5. Project Structure .......................................................................................................... 27

Chapter Two: Gender, Productivity and Growth ............................................................. 29

2.0 Introduction ................................................................................................................... 30
2.1. Stylized Facts ............................................................................................................... 31
2.2. Theoretical Background ............................................................................................... 37
2.2.1. A Gender Inequality Kuznets Curve ..................................................................... 38
2.2.2. Sens Exchange and Entitlement Theory .............................................................. 39
2.2.3. Efficiency and Equity ........................................................................................... 40
2.2.5. Growth Theories ................................................................................................... 42
2.2.6. Beckers Household Allocations .......................................................................... 44
2.2.7. Lewis Model of Growth and Income Inequality ................................................... 45
2.3. Critical Literature Survey Findings ............................................................................. 46
2.3.1. Efficiency, Opportunities and Outcomes .............................................................. 46
2.3.2. Gender Inequality Hinders Growth....................................................................... 49
2.3.3. Gender Inequality is Good for Growth ................................................................. 58
2.4. Chapter Summary ........................................................................................................ 62
7

Chapter Three: Gender and Social Development .............................................................. 64

3.0 Introduction ................................................................................................................... 65
3.1. Stylized Facts ............................................................................................................... 68
2.4. Critical Literature Survey Findings ............................................................................. 74
2.4.1. Overall Health and Education ............................................................................... 74
2.4.2. Islam, Ethnic Fractionalization and Social Development ..................................... 81
2.4.3. Poverty .................................................................................................................. 83
2.5. Chapter Summary .................................................................................................... 86

Chapter Four: Gender and Institutions.............................................................................. 88

4.0. Introduction .................................................................................................................. 89
4.1. Stylized Facts ............................................................................................................... 91
4.2. Theoretical Background ............................................................................................... 99
4.3. Critical Literature Survey Findings ........................................................................... 105
4.3.1. Women Are Officially The Fairer Sex in 2001 ................................................ 106
4.3.2. Limitations and Comments on These Studies..................................................... 109
4.3.3. Post-2001 Literature ........................................................................................... 111
4.3.4 Further Empirics .................................................................................................. 115
4.3.5. Chapter Summary ................................................................................................... 121

Chapter Five: Discussion and Conclusion ........................................................................ 126

5.0. Summary of the Project Results................................................................................. 127
5.1. Policy Analysis .......................................................................................................... 129
5.2. Project Implications and Policy Recommendations .................................................. 131
5.3. Avenues of Future Research ...................................................................................... 134
5.4. Concluding Remarks .................................................................................................. 136

6.0 Bibliography .................................................................................................................. 138

Appendix One: List of Variables ....................................................................................... 153

Appendix Two: Raw Data .................................................................................................. 154

LIST OF FIGURES
Figure 1.1 - Global Patterns of Gender Inequality .17
Figure 1.2 - Women Now Live Longer than Men in All Regions......18
Figure 1.3 - Time Trend of Womens Share of the Labour Force in Different Regions19
Figure 1.4 - A Simple Model of Gender Inequality and Socioeconomic Development.....24
Figure 2.2 - Global Gender Gap and GDP per Capita (2009) .. .32
Figure 3.2 - Gender Development and GDP per Capita (2006) .. .32
Figure 2.3 - Gender Empowerment and GDP per Capita (2006) ..33
Figure 2.4 - Gender Empowerment and GDP per Hour (2006) 33
Figure 2.5 - Gender Empowerment and Labour Productivity Growth (2006) ..34
Figure 2.6 - Gender Income Ratio and GDP per Capita (2006) 34
Figure 2.7 - Gender Empowerment and MFP in OECD Countries (2005).35
Figure 2.8 - Gender Equality Index and GDP Per Capita Growth (2005-2008; all years).36
Figure 2.9 - Competitiveness and Gender Inequality..46
Figure 2.10 - Klasen's Predictions for Growth with East-Asian Equality...55
Figure 3.1 Gender Empowerment and Human Development in 2006.69
Figure 3.2 - Gender Development and Human Development in 2006...70
Figure 3.3 - Male to Female Income Ratios and Human Development in 200670
Figure 3.4 - Gender Development and Male and Female Life Expectancy in 2006..71
Figure 3.5 - Gender Empowerment and Life Expectancy in 2006.71
Figure 3.6 - Gender Development and School Enrolment in 200672
Figure 3.7 - Gender Development and Adult Literacy in 2006..72
Figure 3.8 - Gender Development and Extreme Poverty in 2006...73
Figure 3.9 - Gender Development and Moderate Poverty in 2006.73
Figure 4.1 - Gender Empowerment and Perceived Corruption ..92
Figure 4.2 - Gender Development and Perceived Corruption 92
Figure 4.3 - Gender Empowerment and Control of Corruption..93
Figure 4.4 - Gender Development and Control of Corruption ...93
Figure 4.5 - Females in Parliament and Perceived Corruption...94
Figure 4.6 - Females in Parliament and Control of Corruption..94
Figure 4.7 - Voice and Accountability and Perceived Corruption..95
Figure 4.8 - Gender Development and Voice and Accountability..96
Figure 4.9 - Females in Parliament and Voice and Accountability96
Figure 4.10 - Females in Parliament and Government Effectiveness.97
Figure 4.11 - Gender Empowerment and Government Effectiveness97

LIST OF TABLES

Table 2.1 - The Labour Market Gender Efficiency/Equity 'Trade-offs.47

Table 4.1 OLS Estimates using WGI Control of Corruption Index......117
Table 4.2 - OLS Estimates using Transparency Internationals CPI118
Table 4.3 Simple OLS estimate of Income Inequality and Gender Development.....121

10

LIST OF ACRONYMS
CCI = Control of Corruption Index (World Bank)
CPI = Corruption Perceptions Index (Transparency International)
FDI = Foreign Direct Investment
GAD = Gender and Development
GDI = Gender Development Index
GDP = Gross Domestic Product
GEM = Gender Empowerment Measure (UNDP)
HDI = Human Development Index (UNDP)
IMF = International Monetary Fund
MDG = Millennium Development Goals
MFP = Multi-factor Productivity
NGO = Non-governmental organisation
OECD = Organisation for Economic Cooperation and Development (advanced economies)
WDI = World Development Indicators (World Bank)
WGI = World Governance Indicators (World Bank)
WID = Women in Development
UN = United Nations
UNDP = United Nations Development Programme
UNESCO = United Nations Educational, Scientific and Cultural Organisation
UNFPA = United Nations Population Fund
UNICEF = United Nations Childrens Fund
UNIFEM = United Nations Development Fund for Women

11

CHAPTER ONE: INTRODUCTION

12

1.0. INTRODUCTION
In the field of development, gender issues are becoming increasingly important. Previously a
focus of church groups, non-government organisations (NGOs), and womens rights
organizations - addressing gender inequality is now firmly in the mainstream of
development activities. UN Secretary General Ban-Ki Moon has only recently announced a
new gender equality agency to amalgamate the smaller gender-related departments and
better manage intergovernmental resources. The gender implications are an important part
of almost any project in the fields of social or economic development.

This project will critically examine economic theory, literature, and empirical trends with
respect to gender inequality and its effect on socioeconomic development, and determine if
this policy focus on gender is necessary for successful socioeconomic development. The
major institutional policy push towards gender equality started in 2001 with the World
Banks highly influential Engendering Development report, and this coincided with the
inclusion of a number of gender specific objectives in the Millennium Development Goals
(MDGs). This was prompted by the UNs 4th World Conference on Women (Beijing
Platform for Action), which is recognised as a landmark event; raising the importance of
gender equality. The contribution of this project relative to the existing literature will be a
point of surveying, clarifying and making an objective judgement on the economics of
gender inequality based on the available evidence. There is no consensus on the effect of
gender inequality on socio-economic development. Some believe that it has positive effects,
and some believe that it has no effect at all. Some even believe that it might be an important
driver of economic growth. Furthermore, much of the current literature on gender inequality
has an agenda of some sort be it institutional, feminist, human rights, or something else.
As an independent and neutral student I am seeking to evaluate all of their cases and look
purely at the economics of gender inequality, without any existing point of view on whether
13

equality is right or wrong, and to provide a piece of research strong enough for the reader to
make a sound value judgement for themselves and better understand this pressing issue.
A lot of economists focus on economic efficiency. Somewhat less focus equity. The majority
of society support equitable and fair outcomes, and a fair and just society. Gender inequality
can cut across most aspects of socioeconomic development and society at large, so it is
indeed important to understand it properly. Efficiency and equity have often been seen as a
trade-off, and the following little anecdote is a useful example of the pervasiveness of gender
issues throughout society.

In 2005 Larry Summers1 was removed from his Presidency of Harvard University for a
number of reasons, one of which was arguably related to biased gender comments he made
in regards to his staffing, stating there was a different availability of aptitude at the high
end. This comment was based on studies showing that male IQs had a higher standard
deviation than females. He dismissed discrimination as a cause because on economic
grounds it would place institutions that practice discrimination at a competitive disadvantage
to those who did not. He did not lack support in his stance but he did face great opposition,
which led to his discontinued tenure at Harvard University and is rumoured to have also cost
him the job of US Treasury Secretary. This is a classic example of gender issues leading to
the re-surfacing of the old efficiency vs. equity argument. Whether Summers was right or
wrong does not matter in this discussion, but it does illustrate just how important gender
issues in all different aspects of society; how they traverse all aspects of economic life; how
important they are in decision-making; and how viewpoints will often differ greatly and be a
source of conflict. This project will shed light on whether there needs to be trade-off and
conflict, or whether gender equity may actually also is economically gender efficient in
development economics.
1

Larry Summers is the current Director of the National Economic Council for Barack Obama.

14

The objective of this project is to analyse the relationship between gender inequality and
socioeconomic development by examining a number of important variables, and see if more
equitable gender outcomes can actually be more efficient as well. More specifically, the
project will look at gender inequality and;

Economic development - focusing on factor productivity and economic growth;

Social development - focusing on health, education and poverty;

Institutional development - focusing on corruption and governance.

The findings of the project will be significant because the effects of gender inequality on all
three of these dimensions are still not clear when surveying textbooks and literature. Since
addressing gender is such an important consideration in the industry and global policy
arenas, it is important to know if all the resources devoted to addressing gender inequality
are being correctly targeted if the goal is to improve socioeconomic development.

There is now a shared understanding within the development community that development
policies and actions that fail to take gender inequality into account and fail to address
disparities between males and females will have limited effectiveness and serious cost
implications - World Bank (2003).

Aside from a clear global focus on gender, there have been a couple of highly influential
findings which illuminate the economic importance of gender issues. For example, if North
Africa, the Middle-east, Sub-Saharan Africa and South Asia had achieved gender equality in
schooling from 1960-1992 as expeditiously as in the East Asian Tiger economies, their
income per capita could have grown by an additional 0.5 to 0.9 percentage points per year
almost doubling Africas per capita income growth (Klasen, 1999). Other economists have
15

conducted studies with similar findings examining the effect on gender equality and growth
(Dollar and Gatti, 1999) and levels of aggregate output (Hill and King, 1993), but there is
still no agreement.

The MDGs are the worlds agreed development objectives. Gender inequality is a recurring
theme throughout the MDGs. While gender issues and gender inequality are made explicit
in the third MDG, women have a disproportionate share of the development problems of
education access, hunger and poverty, child mortality and maternal health, and HIV/AIDS
(UNIFEM, 2009). From a policy-making perspective, we can generally say that it is
economic growth which is a prime concern of most development economists in national
governments, academia and international organizations. Economic growth is typically
correlated with improvements in a number of the other MDGs, and although the monetary
aspect of development can help serve as a foundation to reach the rest of the goals, it alone is
not sufficient.

The MDGs have made directly addressing gender issues an important part of development,
and this is reflected in the missions of different UN bodies (UNIFEM, 2009; UNICEF, 2009;
UNDP, 2009), and the seminal World Bank report in 2001. It is important for us as
economists to understand the relationship between gender inequality and development
outcomes in order to craft better policy decisions. By these outcomes, I refer to not just
economic growth, but also social development and institutional development, all of which
are closely linked. It is also important to understand how these different facets of
development fit together with gender issues, and the complex interactions between the
different variables and outcomes.

16

1.1. RECENT TRENDS IN GENDER

Gender inequality remains pervasive around the world today, despite the significant
economic and social progress of the last century. There is no region of the developing world
where women possess the same legal, economic and social rights as men. While the
problems are felt most by women, the costs of gender inequality cut across all of society and
the economy, and can ultimately harm everyone (World Bank, 2001). Economic and social
development allows for various opportunities to increase gender equality in the long run, and
there is significant literature to support this. However, economic growth alone cannot deliver
perfect results. It is necessary to have an institutional environment which enables this
change, and social policy measures must be taken to address persistent inequalities (World
Bank, 2001). Figure 1.1 shows gender inequality around the world in the four areas of
health, education, economy and politics, with 0 representing complete inequality and 1
representing complete equality. It illustrates how gender equality is globally now high in
health and education, but the economic and political arenas are still lagging somewhat,
especially the latter (World Economic Forum, 2009).
Figure 4.1 - Global Patterns of Gender Inequality

Source: Global Gender Gap Report World Economic Forum 2009

17

Across South Asia, Sub-Saharan Africa, the Middle East, and North Africa, the primary
enrolment rate of girls has roughly doubled in the last 50 years, and is still rising faster than
boys substantially reducing gender gaps in education (World Bank, 2001). Meanwhile,
womens life expectancy has increased by over 15 years in developing countries, and the
expected biological pattern of female longevity has now emerged in all developing regions,
with females now outliving males as depicted in Figure 1.2.

Figure 1.2 - Women Now Live Longer than Men in All Regions

Source: World Bank, 2001

In the labour force, female participation is growing faster than that of men an average of 15
percentage points in East-Asia and Latin America also narrowing the gender gap in
employment. Figure 1.3 shows the different regional trends in female labour force
participation, with half of the regions showing significant improvement in equity and the
other half remaining stagnant. Gender wage gaps have also narrowed in most countries.
Amidst this progress, gender gaps do still persist around the world, and repeated
socioeconomic shocks set back this progress and place these gains in jeopardy.
18

Figure 1.3 Time Trend of Womens Share of the Labour Force in Different Regions

Source: World Bank, 2001

Gender inequality in basic rights tends to be more prevalent in less-developed regions, and
tends to improve with economic development. This economic project is concerned with the
inverse relationship, the effect which addressing gender inequalities has on economic
development outcomes. One only has to browse the formidable websites of any of the UN
agencies or large NGOs to find many projects, divisions, research projects, magazines and
even general rhetoric about gender in development. Although the policy push has only
been in full force for the last decade, the trends above show significant progress has been
made for almost half a century.

19

1.2. KEY DEFINITIONS AND CONCEPTS

As gender inequality can be a broad topic, this section will now state the definitions to be
used for the project, and the indicators to be examined.

The United Nations Population Fund (UNFPA, 2009) provides the following definition of
gender:

"The term gender refers to the economic, social and cultural attributes and opportunities
associated with being male or female. Gender attributes and characteristics,
encompassing, inter alia, the roles that men and women play and the expectations placed
upon them, vary widely among societies and change over time. But the fact that gender
attributes are socially constructed means that they are also amenable to change in ways that
can make a society more just and equitable."

The UNFPA (2009) provides the following definition of gender equality:

"Equality between men and women exists when both sexes are able to share equally in the
distribution of power and influence; have equal opportunities for financial independence
through work or through setting up businesses; enjoy equal access to education and the
opportunity to develop personal ambitions, interests and talents; share responsibility for the
home and children and are completely free from coercion, intimidation and gender-based
violence both at work and at home.

20

Similarly known as the gender-gap, the Oxford American Dictionary (2009) defines the
gender-gap as the discrepancy in opportunities, status, attitudes, etc. between men and
women.

Gender inequality is measured using a wide array of indicators and proxy indicators. These
are generally from an opportunities or outcomes perspective and some key areas of
measurement are health, education, employment, representation, and legal rights. In fact, the
gender indices used by the United Nations Development Programme (UNDP) and World
Bank are typically comprised of differences in life expectancy and education levels such as
enrolments, and democratic representation such as the proportion of parliamentary seats
occupied by females. The studies which we survey in this project will commonly refer to
gender wage gaps, differences in education and health outcomes, and also parliamentary
representation. The UNDP Gender Development Index (GDI) and Gender Empowerment
Measure (GEM) will also be used in a number of graphs, and these are comprised of the
weighted averages of a number of such gender aggregates.

With the ultimate goal of providing insights to socioeconomic development, it is important

to first provide some clarification, as development is a very broad and holistic concept.
Economic development, social development, and institutional development are key
dimensions of the broad notion of development which will be studied in this project. More
specifically, in the sphere of socioeconomic development, I refer to a combination of
economic and social development outcomes, but only examining certain dimensions. In
economic development I will just be concerned with income, growth and productivity.
Development has often been confused with economic growth, which is necessary for
development, but alone it is not sufficient when accounting for the other social indicators
listed in the MDGs. Reduction of monetary poverty is only one of the eight MDGs.
21

In social development I refer to the overall level of development of the non-monetary aspects
as proxy by health and education aggregates. Monetary social development will be examined
using poverty rates. I will also consider institutional development, which is also a broad
concept, but be primarily concerned with corruption and governance. I believe this to be the
area most affected by gender inequality, and also the most interconnected to socioeconomic
development and other dimensions of institutions which are beyond the scope of this study.

The widely-accepted UNDP (2009) definition of development is:

To live a long and healthy life, acquire knowledge, and have the resources needed for a
decent standard of living.

Sen (1987) defines development as:

The expansion of the capabilities of people to live the lives they choose to lead, and;
Expanding the capability of people to live a minimally accepted life.

Both of these broad definitions touch on both the monetary and non-monetary aspects of
development enumerated in the previous paragraphs, and are implicitly concerned with
inequality. Gender inequality directly impacts ones ability to be healthy, educated, income
earning -- and most importantly with Sens definition -- ones ability to have their own
capabilities and freedoms. As this study will demonstrate, these disabilities and un-freedoms
are often the transmission mechanisms through which society at large can bear the costs of
gender inequality.

22

1.3. MODEL OF GENDER INEQUALITY IN DEVELOPMENT

To understand the effect of gender inequality on socioeconomic development properly, it is

important to note that there are several different relationships at play. Lets assume the
following composition of socioeconomic development:

Socioeconomic development = economic development + social development

I expect economic development, which I will mainly proxy by the level and rate of growth of
real per-capita GDP, to be affected directly though gender inequality in a number of ways. In
the short term, we will see transmission through indicators such as wages and income, but in
the long term the transmission mechanisms will be in the many determinants of long term
growth; including health, education, investment and institutions. As factor productivity is a
key determinant of growth, I expect that gender inequality may also affect different
productivities. My model of gender inequality and growth can be represented by the
following simple functions:

Economic growth = f (gender inequality, institutions, other control factors)

Where:
Institutions = f (gender inequality)

23

I also expect gender inequality to directly affect social development. I will only focus on the
dimensions of overall health, education and poverty, and represent gender inequality and
social development with the following function:

Social Development = f (gender inequality, institutions, other control factors)

Where:
Institutions = f (gender inequality)

Figure 1.4 shows a simple diagrammatic representation of this model, with the direct effects
of gender inequality on socioeconomic development on the left and the indirect effects
transmitted though institutions on the right. The project will work through this framework,
examining first the former and then the latter. The models purpose and structure is such that
this one project can hopefully provide answers or some kind of consensus on the effects of
gender inequality across the interdisciplinary fields which make up development economics.
Then, when the effects and transmission mechanisms are better understood as a whole within
this framework, may be better able to make a value judgement on gender policy and the true
efficiency of equity.

Figure 1.4 A Simple Model of Gender Inequality and Socioeconomic Development

Economic
Institutions

Gender Inequality
Social

24

1.4. ASSUMPTIONS, LIMITATIONS AND DATA SOURCING

There will be a number of recurring assumptions and limitations. As already stated,

development is a wide concept with many different dimensions, and I will only be
examining a few of these and deliberately neglecting others as they are outside the scope of
the project and not crucial for my gendered socioeconomic analysis. Furthermore, economic,
socioeconomic, and institutional developments also are broad concepts themselves, for
which we will only be examining certain dimensions and neglecting others. This is not
because any of the neglected dimensions are less important. This project is concerned with
the socioeconomic effects of gender inequality, and it is an economics project. This is to be
made explicit because gender is often thought to be in the realm of many other disciplines
and while I may draw on some of their material, the focus is only on the economics of
gender. It is not an anthropological or political science piece, so theory, literature and
rhetoric from disciplines other than economics will be omitted and considered irrelevant.

After examining the direct effects on socioeconomic development, I will presume any
institutional improvement (or deterioration) brought about by gender inequality will directly
affect economic growth and social development, for which institutions are a fundamental
determinant. Therefore, gender inequality will indirectly hit socioeconomic development
through the conduit of institutions. This is to be made explicit because there may be various
other factors affecting the indirect links and interaction between institutional variables and
socioeconomic development. However, based on institutional literature and theory, I believe
there are adequate grounds to assume that institutional improvements will result in improved
socioeconomic outcomes, ceteris paribus.

25

Gender inequality in developing countries has traditionally involved female subordination

and the female sex bearing the bulk of gender inequality. So, when the gender gap is
discussed in this project, the status quo will be females earning, living, and learning less than
males. Lessening any gender gaps can be assumed to be improving the status, participation
and respective outcomes of females.

Models, theories and conjectures of income inequality will often be used to try to explain
gender inequality, and this is because the author believes such models accurately represent
the distribution of power and decision making processes described in the project. The poor
are often marginalized and disadvantaged with respect to income inequality, and the same
problems are often experienced by a gender when discriminated against. Furthermore, due to
the patriarchal nature of many developing countries, women are repeatedly suffering from
income inequality and poverty also, so I deem such inequality models as useful
representations and powerful tools to understand the dynamics of gender inequality too.

The primary purpose of this economic project is to critically review literature and empirical
studies, not to conduct my own intensive econometric analysis. The project is to survey the
literature and critique the different arguments found, not to put my own argument forth and
rigorously test it using quantitative methods. Any empirical data used shall be simply
incorporated to show stylized facts, trends and correlations between the different variables
examined. Any regressions used, as in Chapter 4, are simply there as preliminary evidence
for some future research and have been done to better understand the variables and criticisms
found in the literature, not to provide robust evidence in support of any hypothesis or
finding. It is acknowledged that many of the relationships and correlations shown throughout
this project will exhibit reverse causality, endogeneity issues, and multicollinearity.

26

Technical analysis to quantify and address these problems is beyond the scope of this
economic project and may be addressed in a later piece. The endogeneity and complex
interactions which reinforce gender inequality throughout the different aspects of the
economy and society at large are also beyond the scope of this project, as it will only be
looking at direct effects long or short term and indirect effects from governance and
corruption in institutions. Everything else will be assumed to remain constant and be held
exogenous to this project.

Any data used in this economic project, in both the stylized facts and regression analysis, can
be viewed in Appendix Two. Unless otherwise stated, data is from 2006. It has been
extracted from reputable sources2 including:

Freedom House Indices

Transparency International Corruption Perceptions Index

United Nations Development Programme Datasets

World Bank World Development Indicators

World Bank World Governance Indicators

1.5. PROJECT STRUCTURE

The project structure will follow the conceptual model shown in Figure 1.4. Chapter Two
will examine the effects of gender inequality and economic growth, and the various
mechanisms through which gender inequality may be transmitted through to growth
outcomes, including human capital accumulation, factor productivity, and investment.
2

See Appendix One for a full list and description of variables and sources

27

Chapter Three will discuss the effects of gender inequality on social development. As two
main components of social development will have already been considered in Chapter Two
health and education this chapter will pay more attention to the overall health and
education outcomes, poverty, and other interesting gender-related influences on social
development, such as Islam.

Chapter Four will look at the effect of gender inequality on institutions. Its relevance will be
explained at the start of the chapter, showing how institutions are a key determinant of
socioeconomic outcomes. This chapter will then look at the effects of gender inequality on
institutions - focusing on corruption and governance. Since much policy focus has been
targeted at including women in governance to fight corruption, and the status quo in many
developing countries is a male-dominated public bureaucracy, we will focus on the effect of
female inclusion in governance on governance outcomes.

Chapter Five will be the concluding chapter, summarizing the findings of the project,
discussing the policy implications of these findings, providing some future avenues for
study, and concluding with some final remarks.

28

CHAPTER TWO:
GENDER, PRODUCTIVITY AND GROWTH

29

2.0 INTRODUCTION

In their 2001 seminal report on gender and development, entitled Engendering

Development, the World Bank discusses how gender inequality in knowledge, health, and
freedom will also influence peoples lives through economic growth (World Bank, 2001).
This report groups productivity and growth together, stating that they are both impacted by
gender access to physical, land and information, capital, gender-based labour practices and
societal norms (World Bank, 2001). The World Bank reports section on Costs to
Productivity and Growth focuses on gender differentials in child schooling as a proxy for
future skill levels, lost output as a result of gender bias in labour markets and capital
distributions, and links between gender inequality and economic growth.

The chapter will examine similar content but firstly, a few distinctions must be made. In
discussing economic growth, I refer to the annual growth rate of gross domestic product
(GDP) and GDP per capita. In discussing productivity, I refer to total factor productivity
(TFP), which is otherwise known as the multiple-factor productivity or the Solow residual.
In analysing sources of growth, once changes in the traditional factors of production are
accounted for, the TFP or Solow residual is used to account for the residual contribution to
production and growth which is made by efficiency, technology and any other influences on
productivity. We expect gender allocation of labour and capital to not just affect labour and
capital productivities, but also TFP. As gender inequality is expected to be deeply embedded
throughout society and the economy, economic efficiency will also be discussed in a far
more general manner, with regard to the overall efficiency and an optimal allocation of
resources and factors of production.

30

Rapidly increasing factor productivities and economic growth have previously led to vast
improvements in many aspects of socioeconomic development; ranging from health,
education and poverty, right through to individual incomes and structural metamorphosis of
an economy (Perkins et al, 2006), so this is an important starting point for my analysis. After
providing some raw data and stylized facts, I will provide a background of some economic
theories, conjectures, and models which may be useful in understanding the relationships to
be discussed. I will then proceed to examine the effect that gender inequality has TFP, which
is supposed to be a key engine of economic growth, and discuss gender inequality from an
efficiency versus equity perspective. I will also critically survey the economic literature
and available empirical findings, evaluating the hypothesis that gender inequality is harmful
for economic growth, and the opposing argument that gender inequality can promote growth.
This discussion will pay particular attention to the various transmission mechanisms, and the
chapter will be concluded with a brief summary on the effect of gender inequality on
economic growth, as a conditional means for perhaps achieving the more holistic goal of
development.

2.1. STYLIZED FACTS

To begin with, we will start by examining some raw data and stylized trends with regards to
gender inequality and income, productivity and growth. From Figures 2.1, 2.2 and 2.3, it is
evident that higher levels of gender equality seem to be associated with higher levels of
overall economic development, for which level of income per person can proxy.

31

Figure 2.5- Global Gender Gap and GDP Per Capita (2009)

Source: WEF Gender Gap Report 2009

Figure 6.2 - Gender Development and GDP Per Capita

80,000

GDP Per Capita (USD)

70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

Gender Development Index (UNDP)

32

Figure 2.3 - Gender Empowerment and GDP per Capita

80,000

GDP Per Capita (USD) (WDI)

70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
0.0

0.2

0.4

0.6

0.8

1.0

Gender Empowerment Measure (UNDP)

Figures 2.4 and 2.5 depict the relationships between the UNDP Gender Empowerment
Measure and GDP per hour in OECD countries, and labour productivity growth in OECD
countries, respectively. Higher levels of gender empowerment tend to correspond to higher
hourly levels of output, with no clear relationship between gender and labour productivity
growth.
Figure 2.4 - Gender Empowerment and GDP per Hour (2006)
160

GDP Per Hour (USD) (OECD)

140
120
100
80
60
40
20
0.0

0.2

0.4

0.6

0.8

1.0

Gender Empowerment Measure (UNDP)

33

Figure 2.5 - Gender Empowerment and Labour Productivity Growth (2006)

Labour Productivity Growth (%) (OECD)

-2

-4
0.0

0.2

0.4

0.6

0.8

1.0

Gender Empowerment Measure (UNDP)

Figures 2.6 illustrates the more specific relationship between income gaps as measured by
the female to male income ratio, and GDP per capita and there is no clear relationship
present.
Figure 2.6 - Gender Income Ratio and GDP Per Capita (2006)

80,000

GDP Per Capita (USD) (WDI)

70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
.1

.2

.3

.4

.5

.6

.7

.8

.9

Female to Male Income Ratio (UNDP)

34

Furthermore to this raw data, it is worth noting that gender inequalities do persist in
advanced economies, and economic development is not a treatment for gender inequality. As
OECD nations tend to have lower levels of gender inequality, these higher incomes also
correspond with increased political and civil freedoms (World Bank, 2001), and increased
income alone may not remove gender inequality.

Consistent with Figures 2.1 2.4, we would expect lower levels of TFP to also be associated
with higher levels of inequality, as TFP tends to rise with the level of economic
development. Figure 2.7 shows multiple-factor productivity (MFP) which is synonymous
with total factor productivity in OECD countries for which the data was readily available
plotted against gender inequality, and there appears to be no clear trend. Perhaps there would
be a difference with non-OECD countries, but data was not readily available.

Figure 2.7 - Gender Empowerment and Mult-Factor Productivity in OECD Countries (2005)

2.4

Multi-factor Productivity (OECD)

2.0
1.6
1.2
0.8
0.4
0.0
-0.4
-0.8
0.0

0.2

0.4

0.6

0.8

1.0

Gender Empowerment Measure (UNDP)

35

Figure 2.8 shows a scatter plot of gender equality correlated with per capita GDP growth of
countries for which data was readily available. Gender equality seems to exhibit a weak
positive relationship with GDP growth rates.

Figure 2.8: Gender Equality Index and GDP Per Capita Growth in Selected Countries (2005-2008 all years)

Source: WDI 2009

The stylized trends in this section allow us to state that gender inequality appears to be
negatively correlated with; overall economic development, productivity as proxy by MFP,
and economic growth. Since these are all simple scatter plots, we cannot infer anything about
the direction of causality. However, it is worth noting that causality has already been shown
in the inverse relationship, with growth proven to cause changes in levels of gender
inequality, and also transform other social structures encompassing gender inequality
(Bourguignon, 2005).

36

For gender inequality to be explicitly included as a MDG, and to be implicitly a part of a

number of the other goals, we expected theories and data to show that gender inequality is
bad for growth and also many other facets of development. This expectation is consistent
with the correlations shown in the stylized facts. The chapter will now proceed to examine
the economic theory which may help us understand this raw data and then review the
relevant literature to clarify the relationships between different variables and mechanisms of
transmission.

2.2. THEORETICAL BACKGROUND

A number of theories, models and conjectures can be applied to the gender economics of
growth and productivity, and they will be reviewed in this section. Some of these theories,
models and conjectures will also be relevant to later chapters, as they can also be applied to
our study of social development and institutions.

The fundamental economic problem is satisfying all human wants with scarce resources.
This becomes a question of optimal allocations. How should the factors of production, such
as labour and capital, be allocated in the most efficient way to best try and solve this
problem? There is a second economic problem, which is the coordination problem of
individual utility-maximizing agents making the correct decisions to properly allocate these
resources. Bear in mind throughout this paper that gender inequality cuts across both of these
problems, altering the allocation of labour, capital and other factors of production in our
quest to solve the first problem, and altering the behaviour, rigid norms and institutions
which are responsible for coordinating this allocation. These economic problems will
implicitly occur throughout the paper and are at the core of most economic theories.
37

The relevant models, conjectures and theories for considering the effect of gender inequality
on socioeconomic development are as follows;

A Gender Inequality Kuznets Curve

Sens Exchange Entitlement Theory

Efficiency and Equity

Growth Theories

Beckers Household Allocation

Labour-Surplus Model

2.2.1. A GENDER INEQUALITY KUZNETS CURVE

Simon Kuznets was one of the most prominent economists in the study of income inequality,
and has derived the Kuznets curve, which is an inverted-U shaped curve representing the
level of income inequality in a country through its different stages of development. It
suggests that as a country moves from an agricultural based-economy to an industrial one,
income inequality tends to steeply rise and then later decrease, following an inverted-U
shape as the economy moves through different stages of development and aggregate income
levels. His theory was accepted until the late 1980s as a stylized fact about development
until evidence proved that it no longer held true (Bruno, Ravallion and Squire, 1998). None
the less, it has proven popular in development economics with its application being
borrowed to show other inverted-U shaped trends, such as environmental degradation and
economic development. It has never been applied to gender inequality, but we speculate here
that there is a possibility that gender-inequality may follow a similar trend over time. The
38

reason why we expect it to follow this pattern is because as a nation develops, thriving
industries may either be male or female dominated, for example heavy industry and textiles,
respectively. As these gender-dominated industries grow, wages should rise and lead to a
rise in inequality. With further development, there will be increased micro-diversity and less
gender segregation in the workplace which will then lead to income inequality declining
again.

2.2.2. SENS EXCHANGE AND ENTITLEMENT THEORY

Sen (1980) discusses how the economic, social and political characteristics of a society and
person in that society can determine their entitlements. He identifies four types of
entitlements in a market-based economy:

Production-based entitlements;

Own-labour entitlements;

Trade-based entitlement; and

Inheritance and transfer entitlements (Sen, 1980).

From this work, Sen went on to argue that freedom is the principle means and end of
development, and the focus should be shifted from those with low-income to those lacking
development of human capabilities (Streeten, 2000). With high levels of gender inequality
impeding womens freedoms and capabilities, gender inequality can indeed be considered
from this perspective.

39

Tisdell et al (2003) went on to apply Sens entitlement theory to women, and show that
womens status is indeed dependent on these entitlements, endowments and bargaining
power. The socio-economic status of women in many developing countries, and therefore
gender inequality, is explained by their lack of entitlements (Tisdell et al, 2003), and all
entitlements are necessary contemporaneously for empowerment and gender equity. This
theory suggests to us a priori that gender inequality as an obstacle to growth may be largely
dependent on initial conditions and the entitlements of men and women, and that inequality
in itself may actually be endogenously reinforcing.

2.2.3. EFFICIENCY AND EQUITY

Governments around the world and companies are establishing quotas for the hiring of
female staff to match males, and even outnumbering them in some cases in the fight to
weed corruption. This policy is forcing an outcome, when there may be equality of
opportunity, but most likely that equality of opportunity will be distorted somewhere along
to way to the outcome by societal norms, history, culture, and other factors. Whether
examining a leading academic institution like the Harvard example in Chapter One, a firm, a
national economy or the global economy, it is clear that there is a policy consensus towards
gender equality of opportunities, but there is no clear consensus as to whether we should also
be striving for equality of outcomes. This is reflected in the economic literature, with
mainstream economics emphasizing equality of opportunity in the sense of formal and legal
equality, but appearing to be quite reluctant to promote equality of outcome in case it
undermines efficiency (Berik et al, 2009). It still attracts much argument and dissent. If equal
opportunities provided to both sexes in the interest of economic efficiency and competition
do not lead to equal outcomes -- partly because of the countless interacting factors does
40

this mean that equal outcomes should still be a goal and forced by policy and interventionist
quotas? On the other hand, should we as economists stick with providing the opportunity;
letting the market work; and accept the most efficient outcome the market then provides?
While gender interventions are clearly equity enhancing, are they also efficiency enhancing
at the macro level?

The most prolific economist with respect to the efficiency vs. equity argument is
undoubtedly Stiglitz (1994), who provides a critique of the fundamental theorems of welfare
economics in a synthesis of the efficiency vs. equity argument. His critique can be used as a
useful tool in considering the mechanics of gender inequality and economic orthodoxy.

The first fundamental theorem basically states that competition leads to efficiency. This
implies that Adam Smiths invisible hand works, a competitive economy is Pareto efficient,
and this is the foundation of our belief in market economies (Stiglitz, 1994). The second
fundamental theorem of welfare economics states that market mechanisms can be used to
reach every Pareto efficient outcome. Therefore, efficiency and equity must be two separate
issues (Stiglitz, 1994). He believes that the underlying assumptions of both of these theorems
limit their validity, because these conditions are unprecedented and rare in the market; that
is, perfect information, and a complete market, respectively. He rejects the first theory that a
competitive market left to its own devices will lead to Pareto optimality because with
imperfect information, efficiency and distribution cannot be so simply distributed and lumpsum redistributions are simply not feasible. This implies that gender equality may not be
self-regulating, nor can we simply allow inequality in the hope for a Kaldor-Hicks style
compensation payout to the discriminated group. He rejects the second theory on this basis
as well, and states that the ability of an economy to actually be Pareto efficient may heavily
depend on the initial distribution (Stiglitz, 1994). A number of studies have indeed shown
41

that due to failures, markets are not always the most efficient way to allocate resources, nor
do they result in efficient outcomes (Binswanger and Deininger, 1997; Duhs, 2006).
Applying this logic to gender inequality, it is implied that gender inequality and gender
efficiency are indeed interdependent issues and the mechanics of the systems of gender
inequality may be exhibit a high level of path-dependence and sensitivity to initial
conditions. A laissez faire approach may then not lead to the most efficient outcome when
addressing gender equity.

This is of relevance to gender inequality, because indeed, efficiency and equity are not two
separate issues, and the question of whether gender equity should be left to the market or
whether interventionist policy should be implemented is a pressing issue in governments and
businesses worldwide. We will go on to see that gender equity and efficiency are highly
interdependent, and after examining the effect that gender inequality has on productivity and
economic growth , we will attempt to provide an objective answer as to whether improved
gender equality will improve productivity and economic growth. That is, is gender equity
also representative of gender efficiency and long-run traditional growth-led economic
development?

2.2.5. GROWTH THEORIES

All widely accepted growth models stress the importance of, investing in health and
education, and using production factors as efficiently as possible to improve growth
outcomes (Perkins et Al 2006). A priori, we do expect gender inequality to have negative
effects on these factors. Health and education together make up human capital, which is an
important determinant of economic growth (Aghion and Durlaf, 2005). Since Rostows
42

stages of growth model in the 1950s, which focused on capital formation (physical, human
and natural) as a pre-condition for economic take-off (Rostow, 1954), capital and
productivity have constantly been an important part of most economic development theories.
The Harrod-Domar model focused on capital investment, which back then referred to
physical capital, but we can use this model, as shown in Equation 1, to understand the
contribution of what is arguably the key input to the growth process in our modern era
(OECD, 1996) human capital.
Equation 1: A modified Harrod-Domar Growth Model

Y/Y = s/hk

Gender inequality increases the denominator (human capital-output ratio), with decreased
human capital outcomes in education and health, and results in lower growth.

Productivity growth has long been identified as a key driver of economic growth, and is
defined as the increase in output produced by each machine or worker (Perkins et al, 2006).
It can be increased through technological change or improvements in efficiency. I expect
gender inequality to be an obstacle to labour and capital productivity, due to allocation
problems posed by inequality, and the fact that capital is more complementary to female
labour than it is to male labour (Galor and Weil, 1996). Furthermore, in neo-classical growth
accounting, we account for the proportion of economic growth which is propagated by each
respective factor of production. Any growth not captured by these factors then forms what is
known as the Solow residual or TFP, and this is often a good representation of the overall
comparative efficiency levels across countries. I expect gender to affect long-run growth in a
dynamic and non-linear manner, disturbing the whole economic system with inefficient
resource allocations. Since TFP is often in practice, a combination of omission of other
variables from growth equations and efficiency gains (Perkins et al, 2006), we do indeed
43

hypothesize that TFP will be significantly affected by gender inequality, as gender inequality
is a complex phenomenon which cuts across many of the factors of production. Calculating
these Solow residuals and attributing their exact proportions brought about by gender
inequality variance are beyond the scope of this project. To simply amalgamate growth
theories into one a priori statement we expect that gender inequality will negatively
influence the labour supply, productivity, factor accumulation, and other determinants of
economic growth.

2.2.6. BECKERS HOUSEHOLD ALLOCATIONS

In his famous 1965 paper, A Theory of the Allocation of Time, Becker likens household
production to that of firms and industries, in the sense that household output is the output of
combining inputs subject to cost minimization, in which case the inputs are goods and time.
Dasgupta (2000) went on to present a two-sectoral model of household consumption
allocation, where household consumption is distributed according to only one set of
preferences subject to the family budget constraint. These theories are relevant to this project
because expansions in employment opportunities are generally believed to lessen household
gender disparities (Dasgupta, 2000), due to a shift in resources in favour of the woman, and
increased income which will shift the budget constraint curve out. This is important to
consider with respect to growth because women are more likely to consider others in their
decisions (Swamy et al, 2001), and are more likely to spend on children (OECD, 2008). We
therefore expect that less gender inequality at the household level may be transmitted
through to long-term growth, as both increased maternal capital transfers and investment in
children as a result of these theories.

44

2.2.7. LEWIS MODEL OF GROWTH AND INCOME INEQUALITY

Two-sector models have been in economic theory for a long time, with the best known early
model originating from David Ricardo. He developed two key assumptions which have been
an important part of economics; labour surplus and diminishing returns. This labour surplus
referred to a British agricultural sector whose labour supply could be drawn on by the
industrial sector without reducing aggregate agricultural production, or causing a rise in
either sectors wages (Perkins et al, 2006). A more modern version of this two-sector labour
surplus model was developed by W.A. Lewis in 1954 with a particular focus on developing
countries, and in this model the modern sector can draw workers from the agricultural sector
with little to no effect on the marginal product of agriculture. The wages are kept low due to
an unlimited supply of labour, allowing the industrial growth to be accompanied by a rising
relative share of income, which is then saved or invested to result in output growth. Similar
to the Kuznets curve, income inequality in this model will continue to rise with economic
development until all the surplus labour has been absorbed and wages become inelastic,
which will result in a fall in inequality. This model traditionally deals with income inequality
and growth, but in the case of extreme gender adversity I expect overall gender inequality to
also include and represent income inequality. Therefore, the gender which is discriminated
against may be hypothetically represented by the poor or traditional sector in this model.
Note that the model does not take into account the political economy of inequality, and the
effect that the high level of inequality at the turning point will have on future redistribution
of wealth. The importance of this model is the fact that it shows inequality is not just an
effect of economic growth; it can be a cause as well. Do the dynamics of this model
accurately represent women coming from the domestic sector to the formal employment
sector?

45

2.3. CRITICAL LITERATURE SURVEY FINDINGS

2.3.1. EFFICIENCY, OPPORTUNITIES AND OUTCOMES
At the industrial and firm level, it is commonplace that gender discrimination does not
promote efficiency, and that employers discriminating will promote a distinct disadvantage
(Becker, 1971). In other words, it is inefficient for them to discriminate because competitors
who do not will have access to a wider variety of skilled human resources. At the macro
level, it has been found that countries which deny gender-equal access to education or health
are likely to suffer economic punishment for the practice of discrimination, with the overall
level of competitiveness of their economies declining over time (Self and Grabowski, 2009).
Figure 2.9 is extracted from the World Gender Gap Report 2009 and shows the positive
linear relationship between a gender gap index and a competitiveness index. Note that a
higher score on the gender gap index corresponds to a smaller gender gap, or less inequality,
and competitiveness does empirically appear to increase with increased equality.

Figure 2.9 - Competitiveness and Gender Inequality

Source: WEF Gender Gap Report 2009

46

Labour productivity has been shown to significantly increase with each degree of further
female education, and educational gender gaps are well-known to be an impediment to
productivity and efficiency (Knowles et al, 2002). Table 2.1 is extracted from the World
Bank report Engendering Development, and illustrates the increased efficiency which
would be brought about if gender inequality in the labour market ceased. Note the significant
9% predicted GDP increases in Brazil and Ecuador.

Table 2.1 - The Labour Market Gender Efficiency/Equity 'Trade-offs'

Source: World Bank, 2001

Although various studies (Becker, 1971; World Bank, 2001) and supporting economic
theory encourage the removal of gender equity in opportunities and discourage
discrimination in the interest of economic efficiency, simple economic theory does not
recognize how embedded markets are with society (Berik et al, 2009). That is, the
pervasiveness of gender issues in society is entrenched in the operation of free markets and
market outcomes will always have a bias and exhibit traits of path-dependence. Market
operations reproduce power inequality such as decision-making authority and senior
47

positions in public and private companies and historical social norms which tend to be
based in these institutions (markets). Therefore, markets can hinder progress in gender
equality through endogenous feedback effects which reinforce the status quo. Berik et al
(2009) discuss this situation with respect to labour markets. They describe where men are
assigned the role of breadwinner or main income provider, there is a rationale for them to
be placed into jobs with upward mobility and higher earnings potential, as it is a more longterm focus and it is assumed that the woman will be the secondary provider who can rely on
the man. This then leaves women to be placed into low wage, insecure, and myopic jobs,
fitting for a secondary income earner.

In OECD countries there has been significant progress and equality of opportunity for both
women and men, yet Beriks theory still holds that markets will reinforce gender inequality
and it is true that gender equality will remain elusive. For example, the average pay
difference in OECD countries was over 18% in full time jobs in 2008, with a 33%
differential in Japan and South Korea, and 20% in Germany, Switzerland, Canada and the
United States. Women are clearly paid less or they are perhaps still working in historically
female-dominated and underpaid fields like education and health care. The highest
differential persists in management positions where educational backgrounds and work
experience are similar, and you also would expect market competition to be the fiercest
(OECD, 2008).

This problem with the laissez-faire approach to gender equity and efficiency has led to
feminist economists seeking equality of outcomes as well as opportunities. In these
outcomes they seek equality in occupations, activities, resources, income and assets, and
there is pressure in many countries, including Australia, to establish binding female quotas in
government and the private sector. There is sufficient evidence to support the argument that
48

equality of opportunity and outcomes are closely related, and that persistent systemic
inequality in outcomes will always feedback and contribute to unequal power dynamics and
unequal opportunities (Berik et Al, 2009). Therefore, simply establishing the equality of
opportunities, or freedoms, may not actually be enough to establish equality of gender
outcomes, nor is there enough evidence to say that forcing gender outcomes will actually be
efficient and welfare enhancing. With so much private and public sector interest in gender
inequality, there is certainly scope for future research to determine the absolute welfare
effects of equal outcomes as opposed to equal opportunities. So far, there is insufficient
evidence to say that gender equity is also gender efficient, but upon reviewing the overall
socio-economic effects of gender inequality it is suspected that there will be very powerful
direct and indirect effects, and efficiency-enhancing externalities.

2.3.2. GENDER INEQUALITY HINDERS GROWTH

Gender Inequality as a Determinant of Growth

Economic growth is a means for expanding capabilities, especially in very low-income

countries. Feminist economists emphasize gender equitable achievement of an adequate
level of provision and expansion of capabilities (Berik et Al, 2009). Although after
examining the raw data we are led to believe that gender inequality will only be negatively
associated with growth, the effects of gender inequality on growth are largely dependent on
which measure of gender inequality or transmission mechanism is being considered in the
evaluation due to the complexity of inequality. For example, differential levels of investment
in human capital stocks such as education and health will not become effective until the
future, while gender wage gaps have been shown to be fast-acting variables influencing
short-term aggregate demand, employment and total output (Berik et Al, 2009). This section
49

will discuss the different transmission mechanisms and the positive or negative influences
that gender inequality has on them. Overall, it is found that macroeconomic effects of gender
inequality are highly contradictory, as inequality can stimulate some aggregates
investment, exports, income inequality - whilst propagating negative effects in others like
income and wages, literacy, school enrolments, productivity, life expectancy and
immunization (Stotsky, 2006; Berik and Rodgers, 2008; Braunstein, 2008; Klasen, 2002;
Seguino, 2008).

For over a decade now, institutional economists at leading institutions like the World Bank
have preached about how equality in education and employment - and the education of
women in particular - leads to improved economic development in the forms of including
higher productivity and faster growth rates (Knowles et Al, 2002; World Bank, 2001;
Summers, 1992). Over this same time, a small body of economic literature has emerged
which looks at the effect of different measures of gender inequality on economic growth, in
which gender inequality is typically measured by the gender distribution of capabilities, and
gender gaps in income, health, education, employment. Various female empowerment
measures are also studied, but it appears that their direct growth effects are yet to be
considered. From surveying the literature, it appears that there is yet to be a quantitative
study conducted using some of the various gender indices available - only gaps in health,
education, wages, employment have been examined, with much normative discussion in the
fields of economics and the broader social sciences. Until 2000, feminist economists have
advocated that the relevance of gender has still not been embraced by the economics
profession, especially in cross-country growth studies which should be including it as a
significant explanatory variable (Seguino, 2000).

50

Upon careful review of the literature, the feminist economists were correct in their strong
assertion. In what is arguably the seminal publication of our time regarding economic growth
- Handbook of Economic Growth, published in 2005 there is a very comprehensive
survey of growth regressions and the explanatory variables used. Indeed, a specific gender
inequality index-type variable did not occur once throughout their bibliographic index of
variables featured at the end, although levels of female education, health and wages were
used in a number of studies (Aghion and Durlaf, 2005). However, since the World Banks
Engendering Development report in 2001, the study of gender inequality is not just in the
realm of feminist economics. It is now firmly in the mainstream as a key policy concern for
most multi-lateral organizations, governments and businesses, and we can infer that it is
highly important that much more specific measures of gender should also be commonly
included as determinants of growth in quantitative studies.

The Gender-Growth Nexus Consensus

In the past decade, evidence is gathering which implicitly supports the hypothesis that
gender inequality slows the long term rate of economic growth, and there is growing
international recognition that gender equality is good for growth and necessary for poverty
reduction (World Bank, 2007). While no one has measured overall gender equality and its
effect on growth, authors have looked at certain aspects of it, using gender gaps in education,
life expectancy, and employment as their explanatory variables and country growth rates as
the dependent variable (Hill and King, 1995; Dollar and Gatti, 1999; Knowles et al, 2002;
Esteve-Volart, 2004; Klasen, 2002). All of these studies are heavily influenced by neoclassical economic theories, and is common in cross-country regression; they implicitly
assume that the estimated effects of gender inequality are homogenous. In other words, they
51

do not account for gender inequality affecting different countries in different ways due to the
underlying institutions, social stigmas, and societal norms. For example, gender differences
in Muslim nations have different dynamics to those which do not, and countries with highlevels of male corruption will have different dynamics to those which do not, and no two
societies and historical systems will be the same. It may be worth putting in extra controlling
interactive variables to better understand these dynamics. It is also worth noting that while
most of these studies are based on orthodox economics and embedded in neo-classical
theories of production, human capital and growth, the heterodox schools of thought such as
the feminist economists, behavioural economists, and even the broader political-science
based theorists mostly agree that gender inequality is an obstacle to growth (Berik et al,
2009).

Formalized back into a factor-productivity perspective, we can look at women as an input to

the production process. In this light, the OECD (2008) found that they are one of the worlds
most underutilized resources. This has important consequences for growth, as gender
equality in employment or more working women would help offset the negative effects
of declining fertility and aging populations. In OECD countries in the last few decades, the
largest share of economic growth has come from simply employing more women (OECD,
2008). Even when there is already a significant degree of gender equality in employment,
like the United Kingdom, it has been found that better harnessing of womens skills could
still lead to a 2% gain in GDP (OECD, 2008).

52

The Transmission Mechanisms

There are a number of different channels through which gender inequality can impact
economic growth. In empirical studies, these are typically measured through gender gaps,
among other variables. The two key channels through which gender equality affects longterm economic growth are in the determinants of human capital health and education.
Other key causal mechanisms are notably job segregation in the labour market, wage
differentials (Seguino, 2000), fertility (Galor and Weil, 1996) and access to resources (Berik
et al, 2009). The speed at which these transmissions occur has a high level of variance, with
wages and enrolment and other fast-acting variables showing their effects quickly, but
variables such as fertility, education levels and life expectancy showing their effect more in
the long term.

Galor and Weil (1996) present some interesting findings about womens capital per worker
and wage levels in the labour market, and their respective greater long-term effects. It was
found that an increase in capital per worker will raise womens wages relative to males
because capital is more complementary to womens labour than it is to mens. Other studies
also shown that because of this fact, technological growth and investment in innovation are
better complements to female labour than male, due to their cognitive ability (Hornstein et
al, 2005; Weinberg, 2000).

Galor and Weil then show how increasing womens relative wages will reduce fertility due
to the opportunity costs of children increasing more than household income. This lower
fertility then raises the level of capital per worker even further, creating a positive feedback
cycle which then generates a demographic transition. A rapid decline in fertility will be
accompanied by increased output growth and per capita incomes (Galor and Weil, 1996). So,
53

in this model the two key effects are; the positive effect of capital accumulation on female
wages, which will increase aggregate income quickly, and the negative effect of female
relative wages on fertility. Additionally, in a study showing how gender equality can account
for the Industrial Revolution and Demographic Transition, Lagerlof (2003), presents a
different model with similar findings to that of Galor and Weil (1996). Lagerlof (2003)
shows how gender equality in human capital and higher opportunity cost for womens time
can lead to the substitution of quantity for quality in children, with fertility falling and
increasing human capital, leading to a higher per-capita income stabilized growth path.

As gender inequality is far greater in developing economies which are primarily

agriculturally-based the economics of gender and growth in agrarian economies are worth
consideration. Traditionally in agricultural economies, the negative growth effects of gender
have been linked to the gender division or labour, inequality in land ownership, and unequal
access to rural credit (Doss and Morris, 2001; Blackden and Bhanu, 1999). However, the
recent paper by Berik et al (2009) argues that the key to increasing agricultural productivity
and growth now lies in gender equality in access to technology and land, rather than wages
and other factors.

The main way that gender inequality affects long-term growth is undoubtedly human capital
formation, accumulation and transmission. Female education as a variable has withstood
rigorous testing and has a statistically significant positive effect on labour productivity
(Knowles et al, 2002), and empirical evidence shows that that educational gender gaps are a
direct impediment to growth and development (Klasen, 1999; Knowles et al, 2002; Dollar
and Gatti, 1999). Furthermore, in extensive cross-country studies, there is a high variance in
female education, and a degree less variance in male education, with men often having
higher education levels than women, especially in non-OECD countries (WDI, 2009).
54

Ceteris paribus, positive growth effects are generated by additional female educational
attainment in all the studies surveyed (Benavot, 1989; Hill and King, 1995; Summers, 1992;
Klasen, 1999; Knowles et Al, 2002; Dollar and Gatti, 1999), which in light of the status quo,
means that lessening gender inequality in education is a clearly a driver for growth. Figure
2.10 is based on Klasens (1999) paper, and extracted from Engendering Development,
showing the expected change in growth rates which would have been experienced if SubSaharan Africa, South Asia, and the Middle East and North Africa managed to narrow their
gender gap in education as quickly as East Asia.

Figure 2.10: Klasen's Predictions for Growth with East-Asian Equality

Source 1 : World Bank, 2001

Specific econometric studies have also been conducted which examine the gender gaps
directly, and it is found that gender inequality in education is linked to higher fertility rates
and lower savings rates which both have negative neo-classical implications for economic
growth rates (Barro and Lee, 1996; Klasen, 1999; Caselli, Esquivel and Lefort, 1996).
55

A rise in fertility reduces the level of investment in each childs education and health, and
therefore has negative effects on a nations aggregate human capital stock. Gender inequality
has been shown to contribute to womens unequal household bargaining power and then
affecting the distribution of resources and investment in children. . It is also interesting to
note that females have a higher tendency to allocate spending to childrens needs than males
do (OECD, 2008). So, gender inequality in spending does indeed lead to lowered investment
in children, which will then lower the quality of the future labour supply, deplete long term
human capital stocks, and impede long run productivity growth (Berik et al, 2009).

Education does not alone make up human capital, we must also consider health. We can state
health and education gender gaps are endogenously determined, as life expectancy has been
effectively used as an instrumental variable for male and female education levels (Klasen,
2002), and gender inequality in educational attainment is often largely mirrored in inequality
of health outcomes (WDI, 2009). Failure to provide adequate maternal and other health
services to women or men will result in lower health outcomes, and these lower health
outcomes are a robustly negative influence on growth rates across a wide variety of
empirical studies (Barro and Lee, 1994; Bloom and Malaney, 1998; Bloom and Sachs, 1998;
Gallup et al, 2000).

Is there a Gender Inequality Kuznets Curve?

Furthermore, while health levels as measured by disease prevalence, mortality and life
expectancies tend to rise with income (Pritchett and Summers, 1996), education and
gender inequality also follow this trend. Current data can provide evidence that gender
inequalities such as income gaps are growing in the rapidly industrializing nations like India
56

and China (WDI, 2009), and OECD countries are clearly pushing to return to gender equality
parity. This shows that there may indeed be a gender-based Kuznets curve of gender
inequality, but our discussion regarding the negative relationship between gender inequality
and growth shows that is unlikely to be binding, and is more likely a result of market
segregation of male workers into the industrial sector in China, and the services sector of
India. Additionally, in less developed countries there is a policy focus on gender
empowerment and education of women. This fact combined with evidence of countries
increasingly leapfrogging the industrial stage of development (Mandeville and Kardoyo,
2009) means that it is unlikely that such a curve will now be valid under empirical scrutiny - just as the original income-inequality Kuznets curve is no longer valid (Bruno et al, 1998).

The Robustness of Evidence Supporting this Hypothesis

Discussion to this point has not actually mentioned female participation rates, which may be
affected by society, maternal and domestic roles, and structural employment demand.
However, significant empirical evidence exists to prove that even when female participation
rates are lower than for males, the effects of gender equality and improved female education
on aggregate education, health status, and population growth, will all provide a significant
indirect boost to productivity and long-run economic growth (Knowles et al, 2002).
Furthermore, female education is also linked to the increased productivity of unpaid,
domestic, and reproductive labour (Hill and King, 1995), showing that there are no cons in
terms of economic growth and productivity which arise from the increased education of
women, regardless of the structure of the economy.

57

There is a compelling body of literature suggesting that gender inequality in education,

wage, and health has negative effects on economic growth through a variety of different
channels. However, to conduct a comprehensive analysis one must assess whether or not
women are actually able to capture the entire extent of increased productivity in the form of
increased incomes and shifting of the steady-state national income, or whether there is a
male-female trade off. This will largely depend of the structure of the economy, institutions
and rules on capital flows (Berik et Al, 2009). With this ambiguity and some opposing
evidence which is in some cases even written by feminist economists it cannot be stated
to which extent gender equality will beneficial for economic growth, but it is clear that the
positive relationship found in the positive trend exhibited by equality in the raw data at the
start of this chapter has plenty of supporting evidence in the literature.

2.3.3. GENDER INEQUALITY IS GOOD FOR GROWTH

In contrast to the all the evidence supporting the hypothesis that gender inequality is bad for
growth, there are a few outlying statistics and studies which provide evidence of the
contrary.

First, consider gender inequality from a Darwinian evolutionary point of view. If child care
and domestic duties were included in national accounting, women would then account for
over half of the GDP in the OECD areas (The Economist, 2006), so there is no question that
they provide just as valuable an input to the economy as men. As it stands though, they are
responsible for a just small proportion of GDP in relation to men (The Economist, 2006).
Could it be part of either the male or female nature to be less productive and have lower
work ethics than the other sex, or be more adaptive to certain types of production? Perhaps
58

males forged this income gender-gap during the industrial revolution with the increased
demand for more masculine, strength-based labour in trades and the then-modern industries,
and it has held strong as a historical and societal norm through to today. It would be
consistent with the basic trends in China and India today if it were the case. There is little
evidence to support such a radical point of view but quite simply it is worth considering as
there are a few societal trends emerging after heavy investigation. For example, women are
far more prone than men to self-declared ill health, reduced work capacity due to illness, and
stress related work disorders (WHO, 2006) all of which contribute to lower levels of
productivity. However, we must also approach this fact with caution as it may be a result of
discrimination, violence, low social support, lack of job security, working multiple jobs,
domestic duties and limited advancement opportunities.

In stark contrast to the previously discussed work which shows that inequality slows growth,
Seguino (2000) provides empirical evidence in stark contrast to the mainstream, showing
that under certain circumstances, GDP growth is positively related to gender wage
inequality, and that part of the impact of the inequality is transmitted through a positive
effect on investment as a share of GDP. Her result does not so much conflict with any other
theories, but is more the application of a standard econometric specification applied to a
unique and small sample of economies which share some common properties. She
recognises that the effects of gender inequality on different variables, including growth, are
likely to depend on the structure of the economy. From this assertion, Seguino (2000) forms
her hypothesis that womens wages relative to mens was a stimulus to growth in exportoriented economies which discriminated against women. She also investigates the
possibility that the transmission mechanism to growth may be a stimulus to investment.

59

Income inequality leads to political conflict and social unrest. There is a vast body of
economic literature and empirical evidence which shows how conflict is a severe
impediment to growth through its negative impacts on investment through the creation of a
climate of uncertainty and instability, and ineffective macroeconomic policy. Seguino (2000)
briefly notes that inequality may be less likely to produce this social conflict if the burden is
shouldered by women, because they were historically socialized to accept gender inequality
as the socially acceptable status quo. She then hypothesizes that in countries with a more
patriarchal system, gender wage inequality will be more likely to produce less negative
growth effects.

The results of this study are robust in favour of the hypotheses tested. In semi-industrialized,
export oriented economies in which women are crowded into export industries, wider gender
earnings differentials lead to higher rates of economic growth, ceteris paribus. A 0.1%
increase in the gender wage gap is representative of a 0.15% increase in growth, and this
variable performed robustly across a series of different equations. To grasp the magnitude of
this effect, consider that increasing the average educational attainment by one year raises the
GDP growth rate 0.5 of a percentage point. It is also worth noting that in her different
specifications, she found that the female human capital variable is positive and significant -consistent with previous work discussed and that the male human capital variable effect on
growth was smaller and insignificant. Higher gender wage gaps in these cases signal weaker
bargaining power on the part of the female worker, and hence skewing the distribution of
labour market power heavily in favour of business. As expected, gender wage inequality has
a positive and highly significant effect on investment as a share of GDP. It can then be
asserted that investment profitability may be affected by low wages, which generate the
foreign exchange to purchase the technological capital necessary for structural change and
rapid industrial growth, as occurred in these countries in the study.
60

This paper is clear evidence that gender inequality can affect growth and productivity in
many different ways. Several channels of transmission are simultaneously at work and these
channels may exhibit either positive or negative effects on economic growth. Furthermore,
the dynamics of these channels are subject to many other interacting factors, including the
country in questions stage of development. The semi-industrialized countries in the sample
have clearly benefited from a high degree of gender wage inequality and it is a causal factor
in their high levels of foreign direct investment (FDI) and rapid growth. The concern is now
that growth has slowed in most of these economies, gender inequality has not significantly
dissipated in even the most successful ones (UNDP, 2009; WDI, 2009).

Seguino (2000) effectively shows that discrimination may be useful for growth in the early
to middle stages of development, in a similar style to that of the Lewis model, where the
industrial sector thrives and drives growth based on a fixed wage for those entering this
labour market. The gender dynamics of labour markets fit this logic too, as women tend to
crowd into low wage jobs, and this explains a portion of the gender wage gaps by respective
jobs and industries. Reiterated, they are effective low cost labour inputs to the industrial
sector. From a public policy perspective, gender discrimination may have actually been a
favourable policy because women are also less likely to form labour unions and lobby for
increased wages, to militarize, or cause as severe a political conflict in the face of inequality
as their male counterparts. In future, growth regression studies should allow for the nonlinear effects of gender inequality variables depending on the underlying level of
socioeconomic development and other factors clearly interacting with gender inequality.

61

2.4. CHAPTER SUMMARY

This Chapter has presented theoretical evidence and empirical studies showing that gender
inequality can be a large obstacle to growth, but conversely it can also act to promote
growth. The net effect of gender inequality is a priori unclear, at least if we are looking at a
generic economy. The net effects are purely circumstantial and conditional upon which types
of gender inequality are examined, what kind of economies are considered, and which
transmission mechanisms are considered.

Gender inequality has previously promoted growth by creating an incentive for investment in
export-oriented economics, that is, feminization of a labour force with lower wages
stimulating investment. The attraction mechanism is best explained by Chinas undervalued
exchange rate keeping wages low attracts FDI and promotes exports. In the same way that
Chinas policy has a similar effect as a tax on domestic consumption and a direct exports
subsidy, a lower wage for a female population decreases their incomes and consumption,
whilst making cheap labour readily available to drive export growth and investment. Such a
discriminatory policy is unsustainable and unacceptable in our current MDG-based
development climate. The severe pressure from the WTO on China for their cheap labour
policies would only be amplified if it were a feminized labour force, there or anywhere else.

Gender inequality may also promote growth in that it is a second-best solution for a maledominated political conflict and civil unrest which arises out of inequality. Having women
bear the greater share of a nations income inequality, as they have historically done in
patriarchal societies, may be a preferred option to society as a whole bearing this burden. It
will decrease the likelihood of militant groups forming, and conflict then erupting over
income inequality, which would create a far greater obstacle to growth.
62

This argument is met with an even stronger consensus that gender inequality is an
impediment for economic growth. Gender gaps in wages have been shown to distort the
incentive systems in place and spending patterns of women, which are primarily invested in
children and developing future human capital. Gender gaps in education are detrimental to
long term growth because of the massive development effects and externalities generated by
a society of educated women, and maternal inter-generational human capital transmission.
Lower gender gaps in education also correspond with lower fertility which is beneficial for
growth and per capita incomes. Gender gaps in health and life expectancy harm a nations
long term growth and productivity, and in employment they have negative effects on
aggregate demand and short run output. Furthermore, female capital per worker has been
shown to have a higher return than male capital per worker, and practical application of neoclassical theory shows that a higher steady-state output and growth rate will correspond with
capital investment that is skewed towards the female. The benefits and costs to economic
growth imposed by gender inequality are clearly skewed so that a reduction in gender
inequality is a more favourable outcome to reach a higher long-term growth path, as the
circumstantial and exceptional studies are somewhat more myopic and set over a certain
period of time.

Ceteris paribus, there is sufficient evidence to believe that in the long-run, achievement of
the goal of gender-equal opportunities in labour, health and education is far more efficient
than the pervasive gender inequality we see today. The policy issue now will be to convert
equality of opportunities into equal outcomes. The complexity of gender inequality does
indeed stress that there may be a market failure in achieving gender-equitable outcomes,
but there is insufficient evidence to state whether or not forced outcomes will yield net
productivity gains compared with the gender inequality status quo.
63

CHAPTER THREE:
GENDER AND SOCIAL DEVELOPMENT

64

3.0 INTRODUCTION

Due to the different dimensions of development, it is also important to also consider the nonmonetary aspects of social development, and also poverty. While strong income growth is an
important condition for poverty reduction, it alone is not sufficient and high poverty can
persist despite strong growth (Bourguignon, 2003). Higher levels of incomes are indeed
associated with better development outcomes, but GDP alone does not capture the nonmonetary facets of development, nor address poverty by itself.

Dynamic efficiency is an economic term for when an economy can appropriately manage
short-term imbalances in the long run, focusing on sustainability and indefinite efficiency.
Short-term efficiency and maximization of benefits at a particular point in time is known as
static efficiency, and usually refers to efficient production or allocation. Economic decisions
which occur over time can amount to many static decisions, whereas a dynamic decision is
one which has some impact on the choices and outcomes of the future. It is through dynamic
efficiency that an economy is further able to endure efficiency improvements over time, and
when making public policy decisions there is commonly a trade-off with what might be
welfare maximizing right now, and what will continue to maximize welfare into the future.
Social development policy is important to consider in this light, as politics can often interfere
with socially optimal public policy. In developing countries this can be attributed to many
possible causes, whether politics, conflict, reforms, budget constraints, corruption, or myopic
behaviour by the government.

65

I will now provide a brief yet colourful example of the dual-edged sword which
policymakers yield when intervening in social development. The Chinese one-child
policy, which combined with their traditionally male-dominated society, has arguably led to
improved social development outcomes in the form of primary education and life expectancy
(WDI, 2009). This, as expected, has helped foster their strong growth and resulted in per
capita incomes increasing. However, a side effect was the fact that preference for males, and
this policy, has led to one of the worlds highest femicide rates. This is the abortion of
female children. Aside from creating a large black market for babies, this policy is starting
to skew the proportion of young males to females highly towards men. With the vast amount
of evidence supporting the benefits of a large, healthy and educated female population as
both workers and mothers we must consider the intergenerational human-capital and social
effects which may stem from this. Improved outcomes now may have severely negative
long-term effects, and this reflects the importance of contrasting the static outcomes with the
more long term dynamic consequences. Is this policy going to be harmful in the long run for
social development and growth, or is the reduction in population growth necessary to boost
per capita incomes more important? Social development is a long-term process, and it is
therefore important to consider it through a long-term dynamic efficiency lens.

Social development is also a broad concept, and it too covers many dimensions. With over
200 different social development variables available from the World Development
Indicators, it is important to be specific as to which aspects are being considered in this
chapter. The UNDP has produced the Human Development Index (HDI), which is a
weighted average index of four indicators for health, education and standard of living3.

Life expectancy at birth, as proxy for population health; literacy (2/3 weighting) and combined primary, secondary and tertiary gross
enrolment ratio (1/3 weighting) as proxy for education; and log of GDP per capita at PPP as proxy for standard of living

66

This measure has been quite popular in development economics but has also seen its fair
share of criticism. Many economists now say that it is poor indicator for development, that it
is just a proxy for GDP per capita or a measure of how Scandinavian a country is (Caplan,
2009), and are dissatisfied with the arbitrary weighting system assigned to the different
variables. Many indicators of social development are flawed like this and sometimes difficult
to distinguish from simple GDP measures due to their correlation. In this section I will
examine the non-monetary social development indicators of overall health and education,
which together make up human capital. I will then discuss then discuss monetary poverty.
These elements of social development are key components of the humanity-based
approaches to development, including the popular capabilities approach as advocated by
Amartya Sen. The importance of social aspects of development has been recognised for a
long time. For example, in his highly influential paper almost fifty years ago, Schultz (1961)
famously stated that; A major limiting factor in the advance of poor countries was
insufficient investment in people.

Health and education are endogenously determined, and share many similarities from a
policy perspective. These include quality vs. quantity issues, intra-sectoral allocations, and
prioritization of programs, targeting, and effectiveness. We must note in advance that much
of the effects of gender inequality on health and education have already been discussed in
the previous chapter, as human capital is an important determinant of growth. In fact, there
are few economic relationships as robust as the positive relationship that exists between
income and education (Perkins et Al. 2006), with ambiguous causality in both directions
(Easterly, 2001). A similar relationship exists between health and economic growth, income
levels, and poverty, only with strong and unchallenged bi-directional causality in all
relationships (Pritchett and Summers, 1996). For example, if 1980s growth rates were 1%
67

higher, half a million child deaths would have been averted in one year alone (Pritchett and
Summers, 1996), and a ten percent increase in life expectancy is expected to result in a 0.30.4% increase in economic growth (Sachs, 2001). Increased health and educational outcomes
also increase productivity and investment which are two fundamental causes of economic
growth in any of the widely accepted growth models (Perkins et Al. 2006). This chapter
provides a holistic discussion of the relationship between gender equality and social
outcomes. Some of the findings concerning this relationship have been mentioned in the
previous chapter. This chapter therefore provides further discussion and evidence, also
addressing pressing policy issues that emerge for gender development in culturally and
religiously diverse countries.

We will begin with some stylized facts and theory, then proceed through a literature review
looking at the hypothesis that gender inequality improves social development, considering
not just human capital, but also the Islamic faith, and poverty reduction.

3.1. STYLIZED FACTS

Figures 3.1, 3.2, and 3.3 show the traditional UNDP Human development index (HDI)
bilaterally correlated against a few different UNDP gender measures; Gender Empowerment
Measure (GEM), Gender Development Index (GDI), and a female to male income ratio.
Figures 3.1 and 3.2 illustrate a clear positive relationship between gender empowerment and
gender development, and the HDI. In fact, the HDI and GDI scatter plot is almost a perfectly
straight line.

68

This is interesting because the GDI is composed in three steps:

1. Male and Female HDI indices are calculated;

2. For each area of the gendered HDI, the pairs of indices are combined into an Equally
Distributed Index to reward gender equality and penalize inequality, which is the
harmonic mean of the two indices.
3. The GDI is then the unweighted average of the three Equally Distributed Indices: life
expectancy, education, and income.

Given that the harmonic mean does place enough of a penalty on gender inequality, this
linear relationship does indeed show a strong overall relationship between gender and
socioeconomic development, with HDI proxy for both social development and economic
development as measured by GDP. Lower levels of socioeconomic development appear to
be highly correlated with lower levels of gender equality, and this is precisely the
relationship that this project seeks to evaluate.

Figure 3.1 Gender Empowerment and Human Development in 2006

Human Development Index (UNDP)

1.0
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.0

0.2

0.4

0.6

0.8

1.0

Gender Empowerment Measure (UNDP)

69

Figure 3.2 - Gender Development and Human Development in 2006

Human Development Index (UNDP)

1.0
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

Gender Development Index (UNDP)

Figure 3.3 shows HDI and a male to female income ratio, and there does not appear to be a
clear relationship there, as some countries with high HDI ratings also have very high levels
of income inequality, and vice versa.

Figure 3.3 - Male to Female Income Ratios and Human Development in 2006

Human Development Index (HDI)

1.0
0.9
0.8
0.7
0.6
0.5
0.4
0.3
.1

.2

.3

.4

.5

.6

.7

.8

.9

Female to Male Income Ratio (UNDP

70

Figures 3.4 and 3.5 look at total male and female life expectancy as a proxy indicator for
overall health outcomes. There appears to be strong positive linear relationship between both
GEM and GDI, and male and female life expectancies. This implies that gender equality
may indeed be associated with more positive health outcomes.

Figure 3.4 - Gender Development and Male and Female Life Expectancy in 2006

Male and Female Life Expectancy (UNDP)

90

80

70

60

50

40

30
0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

Gender Development Index (UNDP)

Figure 3.5 - Gender Empowerment and Life Expectancy in 2006

Male and Female Life Expectancy (UNDP)

90

80

70

60

50

40

30
0.0

0.2

0.4

0.6

0.8

1.0

Gender Empowerment Measure (UNDP)

71

Figures 3.6 and 3.7 show the relationship between the GDI and selected educational
outcomes; enrolments and literacy rates. There appears to be a positive linear relationship
between both gender equality and school enrolments and also between gender equality and
literacy.
Figure 3.6 - Gender Development and School Enrolment in 2006

Total School Enrollments (%) (UNDP)

120

100

80

60

40

20
0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

Gender Development Index (UNDP)

Figure 3.7 - Gender Development and Adult Literacy in 2006

100

Adult Literacy Rate (%) (UNDP)

90
80
70
60
50
40
30
20
0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

Gender Development Index (UNDP)

72

Figures 3.8 and 3.9 show the relationship between gender development and poverty rates
$1.25 US per day and $2.00 US per day. In both cases it appears that lower levels of gender
development highly correlated with increased incidence of poverty, which is not surprising
as many development indicators tend to move together.

Poverty Rate (% population on 1.25 per day or less) (WDI)

Figure 3.8 - Gender Development and Extreme Poverty in 2006

90
80
70
60
50
40
30
20
10
0
0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

Gender Development Index (UNDP)

Poverty Rate (% population on $2 per day or less) (WDI)

Figure 3.9 - Gender Development and Moderate Poverty in 2006

100

80

60

40

20

0
0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

Gender Development Index (UNDP)

73

These are just ordinary least squares (OLS) correlations and we cannot infer any causality,
but from this raw data it appears that gender inequality does indeed tend to be negatively
correlated with all of the dimensions of social development examined in this section. These
stylized facts are indeed confirmed by the existing empirical analysis. Health, education and
poverty are highly related to one another and overall improvements in social development
will tend to have them all improve together, but it is unclear which variables are the most
affected by gender inequality as health, education and poverty are all endogenously
determined.

2.4. CRITICAL LITERATURE SURVEY FINDINGS

2.4.1. OVERALL HEALTH AND EDUCATION

Reviewing the current literature, it is clear that gender inequality has no positive effects on
social development outcomes. This is consistent with our stylized facts and expectations. We
will discuss health and education together here due to their endogenous determination and
many similarities shared.

Throughout his Presidency at the World Bank, Wolfensohn often discussed the way that
educating girls and better health outcomes have a catalytic effect on all dimensions of
economic development.

If we educate a boy, we educate one person. If we educate a girl, we educate a whole family
and a whole nation (Wolfensohn,1995).

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The precursor to this female-focused policy and research push was Summers (1994)
influential paper which argued that female education provided the greatest returns to
investment in development versus any other investment. Furthermore, improved health
outcomes led to better economic outcomes through many channels including reduced health
care expenditure, reduced disease burden, and the ability to live longer and more productive
working lives. The benefits of social development do not need elaboration. Of concern to us
is whether pervasive gender inequality will significantly harm social development in the
form of health and education outcomes, or not.

Gender discrimination and inequality is sometimes explained to be naturally occurring due to

the traditional status of women with men as the breadwinner and less social conflict
arising from the discrimination against women than from other forms of discrimination and
conflict such as racial, religious and political. In the workplace women were usually not
given jobs with a high degree of upward mobility because men typically provided the
majority of household income with women staying home to raise the children and do unpaid
domestic labour. This logic extends to the social outcomes of health and education, with a
preference typically given to men as the breadwinner. This is not the case anymore, and
although gender inequality is still strong in many areas, it has indeed diminished a lot. The
gaps in access to education and literacy are the gender indicators showing the greatest
improvement (World Bank, 2001; WDI, 2009). However, this improvement is especially
strong in advanced and industrializing economies and less so in the developing countries
(WDI, 2009). So progress in gender equality is more rapid in countries where discrimination
is already low, but progress is much slower and sometimes stagnant in countries where it is
needed the most. As shown in Figures 3.1 and 3.2, gender inequality is highly related to
social development as proxy by HDI, of which GDP per capita makes up a significant
75

component. This represents the endogeneity between gender inequality, social development
and human development. Therefore, a country lagging behind in one of these areas, say
economic development, may face a far harder task than a developed country, in bridging the
gender gap.

While there are cognitive skill differences between boys and girls -- in almost all countries
girls read better but boys are better at maths differences net to zero, showing that changing
educational quality is most important and applies equally to boys and girls (World Bank,
2008). Equality in education increases overall education outcomes, and creates great
externalities in social development, including the innovation rates in a society, community
engagement, and better health benefits (Acemoglu and Angrist, 2004; Haveman and Wolfe,
1984). Social benefits generated by womens schooling are especially significant in
developing countries (Schultz, 2002). Externalities are also generated in the form of
intergenerational effects, as parents who are more educated tend to spend time with their
children more effectively, are better at assessing their childrens education and serve as
better role models (World Bank, 2008). Furthermore, womens parental capital is shown to
have a far greater impact on overall child schooling than mens schooling (Ainsworth and
Filmer, 2006). With the endogenous determination of health and education outcomes,
improved equality in education delivers large intergenerational health benefits too. For
example, if we considering child mortality, an extra year of female schooling reduces infant
mortality 5-10% (Schultz, 1993) and children of mothers who have at least 5 years
education are 40% more lively to live past the age of five than children of uneducated
mothers (Summers, 1994).

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All of these findings suggest that gender inequality is harmful for the health and education
aspects of social development, while supporting the policy stance of lessening education and
health gaps between men and women often by targeting women directly. Moreover, they
are quite fitting with the stylized facts provided at the start of the chapter.

The most effective investments for increasing productivity as well as enhancing the well
being of families are simply increasing education and literacy rates. UNESCO reports that
there have been dramatic gains in reducing gender inequality in school attainment, but the
gains have not been uniform (UNESCO, 2005) nor without serious concerns.

General investment in females has been shown to have higher payoffs than males (Summers,
1994).This may be attributed to the status quo of health and education attainment around the
world previously being highly skewed in favour of the male group, or due to the positive
intergenerational and maternal effects that women have on their families and society as a
whole. Hindering this transmission of health and education to women, and pervasive gender
inequality, is therefore harmful to overall social development. That said, such provision
should not be in favour of women or female-only policy, as men may find themselves in the
same disadvantaged position as women used to.

As mentioned before, gender equality in health and education generates great social returns.
A few studies have tried to measure the social return to schooling, and they are found to be
far higher than private returns (Acemoglu and Angrist, 2000; Haveman and Wolfe, 1984).
However, it is the private returns which to education which has been found to be the key
determinant of investment in education, and enrolment rates (Kingdon and Theopold, 2006).
This may indeed prove a barrier to equitable provision of education to men and women, as in
developing countries, the rate of return to primary education is lower than for men; the return
77

to female education become higher through secondary education; but at the university level
men then again yield higher returns (World Bank, 2008). These findings do not hold in some
studies, for example Barro and Sala-i-Martin (2005) find that secondary education has a
negative coefficient representing negative returns -- in their growth regression. These
results can all be approached with caution because investment in education, or continuation
of education, is not only determined by the returns to education but also by life expectancy,
household finances, and the cost of schooling. This clearly displays the endogeneity of
health and education in human capital accumulation. However, these respective lower
returns to primary, tertiary, and possibly even secondary female education may affect efforts
to achieve equality in education, especially in countries which do not have universal primary
education.

These problematic incentives also take us back to the MDGs. While this incentive structure
may have been an obstacle to the second MDG of universal primary education, far more
young girls are now receiving primary education in some of the poorest parts of the world
and this trend continues. The third MDG however is measured by elimination of educational
disparity at all levels. As very few women are progressing past primary education to receive
secondary and tertiary education (World Bank, 2006), this MDG is less likely to be attained
since inequality at the higher levels of education is still highly prevalent and showing no
signs of improving quickly. The higher returns to female secondary education state that this
should not be the trend which we are seeing, but it is, and we expect it will only be harder to
achieve at the tertiary level if universal secondary education is proving such an elusive task.

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The OECD states that at the global level, there is still a persistent educational gender gap and
developing countries are not investing in the optimal mix of female and male education
(OECD, 2006). In light of the other studies, such a statement is easy to immediately
criticize, as investment should not be in either female or male education in the form of
targeted investment, but in the inclusive provision of education to both genders in a nondiscriminatory manner which enables opportunities for both. Policy targeting focus groups
will inevitably neglect those outside the focus group, regardless of whether or not they were
previously discriminated against. The result of such targeted policy may later place males at
a comparative disadvantage in line with the shift of male labour in OECD countries towards
masculine, trade-based labour, with lower-pay at the high end and lower educational
requirements.

In OECD countries women are now becoming more educated than men, and the challenge
now is to make better use of womens qualifications and respective skills sets. In developing
countries and emerging economies, the situation is the reverse. Reducing gender inequality
in education and health reflected in indicators such as life expectancy and literacy is
absolutely essential to reduce poverty and speed up economic and social development, but
men must not be neglected. Focus should be on universal education and health, not just
focusing entirely on females to try and bridge gender gaps. However, once these women are
educated in developing countries and emerging economies, the current situation in OECD
countries will only replicate itself. It is important to make sure that the investment in
education is met with adequate job opportunities, or this large investment in education is
practically lost.

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Of particular relevance to developing countries and social development are some studies on
gender inequality and violence, as these countries tend to be more prone to have intracountry conflict and violence. Mukherjee (2007) found direct empirical links have been
found between gender inequality and persistent structural violence within a country, while
Sen (1999) found that women with education are more likely to resist and not tolerate
violence. Combining these findings together we can assert that gender inequality is
associated with persistent violence, while gender equality can help to reduce it. This is
interesting, as Seguino (2000) puts forth the opposite hypothesis that gender inequality may
lessen the likelihood of conflict in a country because women are less likely to react to
inequality than men, but she does not test it empirically. If all of these hypothesised
relationships are reality, there may be some kind of a trade off; or the increased conflict and
gender inequality may just be a result of other variables. Regardless, Mukherjee (2007) and
Sens (1999) findings are conclusive that gender equality is associated with a decreased
likelihood of conflict, and the presence of conflict is typically a major hindrance for social
development.

As expected from surveying our raw data, gender inequality does harm social development
in education and health. For over twenty years there has been significant economic literature
published as supporting evidence of the fact that female education produces social welfare
gains. Since men were traditionally more formally educated than women, and still are in
developing countries, this female education is representative of lower gender inequality in
education. The evidence shows that these social gains are yielded in reducing fertility and
infant mortality, increasing life expectancy, improving family and child health, and
increasing the quantity and quality of childrens educational attainment levels (Subbarao and
Raney, 1995; Schultz, 1988; Behrman et al, 1988). It has been found that even if female
participation rates in different markets are lower than for males, these effects of improved
80

female education on general levels of education, health status, and population growth will
indirectly boost productivity as well as all social development aggregates (Knowles et al,
2002). The high social returns generated by the eradication of gender inequality in health and
education more than justify gender equitable policy action and public spending to fight
gender inequality. However, the differential returns to both male and female education and
labour indirectly signal that there may be problems in the labour markets as well, and that
achieving social development by removing gender equality in health and education may also
involve addressing structural and social problems in the other markets which are distorting
the incentive systems in place and making equitable outcomes harder to achieve.

2.4.2. ISLAM, ETHNIC FRACTIONALIZATION AND SOCIAL DEVELOPMENT

Despite significant progress, there are still certain factors that greatly hinder the reduction of
gender inequality and its respective improvements on social development outcomes. One
serious, yet controversial, example of such a factor is Islam. Empirical studies have shown
that the extent of Islam in a nation tends to increase gender inequality, decrease female
attainment of secondary education, and overall female literacy (Self and Grabowski, 2009).
Such evidence and the constant resistance to gender equality that prevails in Muslim
societies have supported the past assumption that Islam is a barrier to gender equality and
reaching the Millennium Development Goals. The resistance has persisted despite many of
them undergoing serious industrialization and development, two processes usually correlated
with reduced gender inequality. We thought such a barrier worth investigating, to see if all
the literature is consistent with this heavy accusation. There are indeed some interesting
outliers to this trend, which prove that these statistical findings and assumptions are not
entirely rigid and robust.
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In the past developing nations have typically used top down education, injected the programs
of international agencies, and other elite-based movements, which have transformed women
and helped to create a vibrant civil society in which female empowerment in personal,
community and transnational levels strongly increase. With this process showing little
positive change in devout Muslim nations, a new process has arisen in the most unexpected
of circumstances. Afghan refugee women living in Iran are a now practising a different
vision of the Islamic faith. These previously disempowered refugees with little rights have
achieved a more egalitarian version of Islam, empowering them to take charge of their own
lives and to lead their societies development (Hoodfar, 2007). However, it is not just in these
refugee camps where this is taking place. A recent paper in the Journal of Development
Studies discusses the great impacts of state policy by Afghanistan, Iran, US and Pakistan, on
Afghan women, and men in Afghani and diasporic communities throughout the Middle East.
It is found that under the extreme forms of uncertainty, coercion, marginalization,
segregation and fear, women and men are establishing voice and agency in a more equitable
society. This forced exile has been an important factor in shaping their new identity. Under
NATO and US occupation they are now challenging the imperialist representation of
Afghani Muslim women and seeking freedom from this hierarchical and patriarchal
domination and subordination (Rostami-Povey, 2007)

Empirical studies also show that social development and gender equality are reduced by
ethnic fractionalization (Self and Grabowski, 2009), but again, with this above example
arising in the context of extreme fractionalization, we cannot hold such studies as binding
evidence when it comes to policy making and achieving the MDGs. If this progress can be
achieved in the most dire of circumstances, it can be done again elsewhere and the effect that
these variable of religion and ethnic fractionalization have on inequality and social
82

development is exactly that variable and subject to change. This presents a clear need for
development practitioners and policy makers to challenge female exclusion from the power
structures of Muslim communities, and help to enable transformation within their cultures
and societies (Hoodfar, 2007).

2.4.3. POVERTY

Another aspect of social development and important part of the MDGs is poverty reduction.
The other forms of social development previously discussed health and education have
an important effect on the reduction of poverty and there is a high degree of
interconnectedness, especially with the different degrees of poverty and different definitions.
These definitions have been broadened from just monetary poverty to include poverty in
opportunity, capabilities, institutions and more.

Approximately 70% of the worlds poor are women and they have unequal access to
economic opportunities in developed and developing countries alike (OECD, 2008). There is
a crucial link between poverty alleviation and development of female human capital and
total social capital. Gender inequality has been found to not only be a key determinant of
health and education, but also poverty and especially disease-related poverty (Mukherjee,
2007). When an index of gender gaps is correlated with GDP per capita, it shows that while
economic progress improves the status of someone and is a powerful tool in fighting
poverty, there is a limit to the advancement that can be made by a country with persistent
gender inequality. This link arises though the channel of social development, which has a
positive relationship with overall economic development. More specifically, market
distortions arise with the denial of equality and economic resources are not allocated to those
83

who could make the most use of them (OECD, 2008). For example, studies have shown that
equality of primary education in Africa can increase food crop yields by up to 20% whereas
equal access to capital would increase output by 15% (World Bank, 2001). Such increases
brought about by equality have a tremendous effect on fighting poverty, and it is important
to realize that while gender inequality may directly hurt poverty, there are again many
indirect effects that it has on poverty which are captured in the both the pure economic
dimensions and the social dimensions. The key is participation, and social institutions and
cultures that promote gender inequality in limiting access to employment, inheritance and
finance will have systemic negative effects on the levels of social development (OECD,
2008). With such inequality being embedded in the economic system, it is harder to remove.

We have discussed briefly in the introductory chapter and this one the effect of women
making up more of the poor population than men, and how gender inequality can also be
represented by income inequality (OECD, 2008). It is also acknowledged that there are
several different dimensions of poverty apart from just monetary poverty which are
systemic societal problems affecting ones capabilities and the opportunities provided to
those impoverished (Sen, 2001). However, some do claim that poverty rates of women are
usually not or only slightly higher than those of men, and the gender poverty cannot be
confirmed empirically, at least when considering monetary poverty (Strengmann-Kuhn,
2007). This paper does consider a case study on Germany, which does not have either a high
poverty rate or high gender inequality by international standards.

84

While gender inequality and poverty are closely related, there is sufficient evidence to show
that reducing gender inequality alone is not enough to reduce poverty. Just as economic
growth, education, investment, aid or any other single variable is not enough to address
poverty, neither is improving gender equality. Poverty reduction through gender equality
will be brought about through a number of channels including health, education, and
economic growth. Poverty has many dimensions and gender equality may just be one of
these. The correlation between gender inequality and poverty in our stylized facts is more
likely a by-product of the other relationships shown in the previous graphs which also
show the same type relationship when regressed on poverty. OLaughlin (2007) shows that a
number of key papers suggesting that addressing gender inequality will directly reduce
poverty are conceptually flawed and that changing womens unequal collective position to a
stronger and individual position cannot and has not decisively reduced rural poverty in
Africa. Instead, the extent to which gender equality can reduce poverty will be contingent on
restructuring the long term and unequal processes integrated within the market, and not just
inserting more women into these unequal societies and markets (OLaughlin, 2007). Razavi
(2007) supports this view and criticism, arguing that a dominant pro-poor and pro-women
agenda of attacking gender inequality without addressing its structures, is likely to further
entrench gender inequalities throughout the market and impoverish the unpaid care economy
even further. She states that redistributions should be more firmly at the centre of policy
design and the correct incentives in place to help remove women from their poverty, such as
valuing unpaid care and allowing for it to be shared between men and women (Razavi,
2007).

85

2.5. CHAPTER SUMMARY

To summarize, improved gender inequality is harmful for social development, and no

evidence was found to the contrary. The extent to which removing gender inequality actually
helps social development does depend on which aspect of social development is examined,
but on the whole gender equality yields positive returns for social development. Robust
evidence shows that improved gender equality in health and education boosts both these
social development outcomes, and they are interdependent on each other. Improvements in
health and education also generate tremendous externalities upon society at large, and are
generally associated with improvements in most aspects of social development. Islam is
often considered as a burden to social development due to the status of women and gender
inequality in Islam societies, but a few studies display how neither Islam nor ethnic
fractionalization are binding variables synonymous with gender inequality. They are subject
to change and cannot be assumed to represent gender unequal societies and lower prospects
of social development. While positive health and education outcomes are admittedly very
powerful tools for addressing poverty, the extent to which gender inequality directly
determines poverty rates is very questionable, and we cannot state that simply improving
gender inequality will reduce poverty. The effects of gender equality on human capital and
economic growth are far stronger tools for poverty reduction than blindly placing more
women in school, jobs and parliament. Most gender inequality is systemic, just as poverty is,
and long-term pro-poor policy seeks to address the problematic processes which drive
poverty. A similar and process-oriented approach needs to be taken to address gender
inequality and the market processes which reinforce gender-poverty structures.

86

Developed countries now face a risk where male human capital is slowly depredating, with
females becoming more educated than men (OECD, 2008). This may pose long term
problems as men are typically better at math and technical work and women are better at
reading and cognitive tasks (World Bank, 2008). Society needs a balance, not a most
favoured educated sex. It is important to not just target women, lest we lose sight of the men
and they develop their own problems (Vera-Sanso, 2008). Policy should strive to provide no
gender discrimination, or favouritism, in order to make the best outcomes and establish
equality of opportunities for social development. Equality of opportunity in health and
education will then boost overall social development which then in turn will assist in poverty
reduction.

87

CHAPTER FOUR:
GENDER AND INSTITUTIONS

88

4.0. INTRODUCTION

This chapter will examine the link between gender inequality and institutions. The logic
behind this is that since good institutions are fundamental determinants of growth
(Acemoglu, 2004) and social development (Kinrade, 2009), any improvements in institutions
which may be brought about by lowered gender inequality will also be helpful to achieve the
broader goal of socio-economic development through indirect effects. That is, aside from the
direct effects on growth and social development already examined in Chapters 2 and 3,
gender inequality may also affect socio-economic development indirectly through the
conduit of institutions.

Institutions can be defined as the rules of the game in a society or, more formally, are the
humanly devised constraints that shape human interaction. In consequence, they structure
incentives in human exchange, whether political, social or economic (North, 1991).

Institutional development is a broad concept with different dimensions including the

effectiveness of law, government responsiveness to people, government effectiveness,
democratic participation, political stability, and control of corruption. We focus on the
governance aspect of institutions, with bad institutions being synonymous with pervasive
corruption and poor governance. We focus on this area because it is in governance which I
expect gender inequality to have the largest effect, and quality of governance tends to often
have a strong influence on the other dimensions of institutions.

89

For the purpose of this chapter, institutional improvements will be typically characterized by
the removal or mitigation of rent-seeking behaviour and corruption from within institutions,
so naturally the chapter will involve some behavioural economics and examining the effect
of gender inequality on rent-seeking and bad behaviour. We will see whether one sex may
be more prone to corruption than another. One of the hardest tasks facing public
bureaucracies is designing institutions which discourage agents from acting opportunistically
at the expense of the public (Dollar et al, 2001), and evidence suggests that gender issues
may be far more important than traditionally understood.

Some typical governance and corruption Indicators include the World Banks World
Governance Indicators (WGI), Transparency Internationals Corruption Perceptions Index
(CPI), Bribery indices of the World Economic Forums Global Competitiveness Report, and
the International County Risk Guides Corruption Indices.

We will begin with some overall stylized facts and an introduction to women in governance,
then following with a section outlining the key theories with respect to institutions. These
theories will enumerate the effects that institutions have on socioeconomic development
considering growth and social development. They will pay particular attention to how
unequal societies and gender inequality fit into this institutional theory. We will then review
the key literature and empirical findings on the effects of gender inequality in institutions,
paying particular attention to the behavioural characteristics of both genders particularly
females who have been traditionally discriminated against in governance and then
conclude this chapter with a summary of the findings and how it all fits within the theoretical
framework.

90

4.1. STYLIZED FACTS

As it stands, women are vastly underrepresented in governance forums, and in most

countries there is a clear absence of women throughout the decision making process from the
local level right through to the national level. A governance gender gap has been found in
countries regardless of economic status, religion or institutions and has been known to be
influenced by factors such as low-labour force participation, poverty, and societal norms,
attitudes and stereotypes with respect to gender roles (OECD, 2008). There is a strong
relationship between labour force participation in the economy and engagement in political
life, and the countries of the Nordic region rank the highest in both. In 2008 women were
outnumbered by men in every single parliament in the world. The OECD average is less than
25% women, the worldwide average is less than 16%, and a number of countries have none
at all.

Figures 4.1 and 4.2 show the Corruption Perceptions Index (CPI) correlated against the
UNDPs Gender Empowerment Measure (GEM) and Gender Development Index (GDI),
respectively. It is important to note that both of these indices rate higher with improved
outcomes; 1 on the GEM and GDI represents very high levels of gender equality, and 10 on
the CPI represents a very low level of perceived corruption. All data for this section is from
2006 unless indicated otherwise. Both of these figures show that higher levels of gender
quality correspond to lower levels of perceived corruption.

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Figure 4.1 - Gender Empowerment and Perceived Corruption

Corruption Perceptions Index (TI)

10

0
0.0

0.2

0.4

0.6

0.8

1.0

Gender Empowerment Measure (UNDP)

Figure 4.2 - Gender Development and Perceived Corruption

Corruption Perceptions Index (TI)

10

0
0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

Gender Development Index (UNDP)

To confirm these relationships, the same gender indicators were correlated against the World
Banks Control of Corruption Index (CCI), from the World Governance Indicators (WGI)
Database. In this data base the indices range from -2.5 to 2.5 and a higher number represents
a higher degree of control over corruption. These findings in Figures 4.3 and 4.4 were
consistent with Figures 4.1 and 4.2.
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Figure 4.3 - Gender Empowerment and Control of Corruption

Control of Corruption Index (WGI)

-1

-2
0.0

0.2

0.4

0.6

0.8

1.0

Gender Empowerment Measure (UNDP)

Figure 4.4 - Gender Development and Control of Corruption

Control of Corruption Index (WGI)

-1

-2
0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

Gender Development Index (UNDP)

93

Another common indicator used to represent gender inequality is the proportion of

parliamentary seats which are occupied by women. Figures 4.5 and 4.6 show the percentage
of female parliamentary seats which are occupied by women correlated against the CPI and
CCI, and while the relationship does not appear to be very strong, there does appear to be a
weak linear trend with increased female presence being associated with lower corruption.

Figure 4.5 - Females in Parliament and Perceived Corruption

Corruption Perceptions Index (CPI)

10

0
0

10

20

30

40

50

60

Female Seats in Parliament (%) (UNDP)

Figure 4.6 - Females in Parliament and Control of Corruption

Control of Corruption Index (WGI)

-1

-2
0

10

20

30

40

50

60

Female Seats in Parliament (%) (UNDP)

94

Some of the key variables expected to also influence corruption are the degree of Voice and
Accountability, and Civil Liberties. Figure 4.7 shows the strong relationship between Voice
and Accountability and perceived corruption, indicating that increased Voice and
Accountability corresponds with lower perceived corruption. The Transparency International
CPI was used to try and minimize any bias which would have been caused by using the CCI,
which comes from the same WGI database as the Voice and Accountability Index. I then
check that there is also a relationship between gender development and Voice and
Accountability, and Figure 4.8 shows high levels of gender development strongly correlated
with high levels of accountability, but the relationship is far less strong at the lower end of
the spectrum. Figure 4.9 shows the correlation between females in parliament and voice and
accountability, and there is far less of a linear relationship than expected. It is only clear once
a trend line is injected into the graph. These three graphs show that the interactions between
gender inequality and corruption may actually be conditional upon other factors such as
political voice, accountability, freedom and civil liberties and other variables.

Figure 4.7 - Voice and Accountability and Perceived Corruption

Corruption Perceptions Index (CPI)

10

0
-3

-2

-1

Voice and Accountability Index (WGI)

95

Figure 4.8 - Gender Development and Voice and Accountability

Voice and Accountability Index (WGI)

-1

-2

-3
0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

Gender Development Index (UNDP)

Figure 4.9 - Females in Parliament and Voice and Accountability

VOICEACCOUNT

-1

-2

-3
0

10

20

30

40

50

60

PARLFEM

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The last two figures -- Figure 4.10 and 4.11 show the relationship between our gender
indicators and the WGI Index of Government Effectiveness, finding that higher levels of
gender equality tend to be associated with a more effective government. This is consistent
with our first few graphs which show that gender inequality tends to be associated with more
corrupt government, which is also less effective government.

Figure 4.10 - Females in Parliament and Government Effectiveness

Government Effectiveness Index (WGI)

-1

-2

-3
0

10

20

30

40

50

60

Female Seats in Parliament (%) (UNDP)

Figure 4.11 - Gender Empowerment and Government Effectiveness

Government Effectiveness Index (WGI)

-1

-2

-3
0.0

0.2

0.4

0.6

0.8

1.0

Gender Empowerment Measure (UNDP)

97

Firstly, these stylized facts are merely bilateral correlations and we cannot state any causality
from the relationships exhibited above, but there is a clear relationship between gender
inequality and poor governance and corruption. Furthermore, there appears to be a number
of other factors which may influence corruption that are associated with gender inequality
such as civil liberties. This chapter will proceed to survey the literature to see if these
stylized facts are sound that is does gender inequality and increased female presence in
parliament result in lower corruption?

Secondly, lets briefly consider the possibility of bi-directional causality, that is -institutional improvements may improve gender equality. Before proceeding, it is worth
establishing that this is not an issue and this hypothesis has not held under empirical testing
(Self and Grabowski, 2009). However, if institutions are separated into those which are
easily adaptable and those which are not, there is a slight difference. Self and Grabowski
(2009) found institutional reform in malleable institutions which involves greater
governance, accountability and access is not likely to cause any significant change in gender
inequality. On the other hand, they found that non-malleable institutions which are
connected to religion, ethnicity and culture, can influence gender inequality, but it occurs
very slowly and over long periods of time (Self and Grabowski, 2009).

98

4.2. THEORETICAL BACKGROUND

Institutions are an important determinant of economic outcomes because the institutional

structure shapes social behaviour and articulates collective actions through the definition of
incentives and penalties, therefore conditioning socioeconomic development (Acemoglu
et al, 2005). A useful survey of the theoretical and empirical literature regarding the effect of
income inequality on institutions was recently conducted. This study stated an overall
consensus that unequal societies develop exploitative and inefficient institutions, and that
such a negative cycle is very reinforcing (Savoia et al, 2010). Extensive empirical analysis
does support this relationship but the authors state that there is still more analysis needed.
The key reason for this is that most of the regression analyses surveyed are likely to be
plagued with endogeneity problems which are to a high degree unaccounted for (Savoia et
al, 2010). Still, we would therefore expect gender inequality to have a negative effect on
institutions; firstly because rent-seeking behaviour in institutions has been historically
dominated by men, and secondly, income inequality in general is associated with poorer
institutions and income is often correlated with sex and status in developing countries.
Income inequality is typically a rich/poor issue, but in developing countries - and with
respect to available opportunities - these rich/poor issues also represent male/female issues
and therefore can be theorized and modelled as such. Institutions have three types of effects:
income effects, conditionality effects, and distribution effects. Gender inequality is an
important moderator of these effects, and can also directly influence the quality of
institutions.

99

Income and Conditionality Effects

Ceteris paribus, if gender inequality is bad for institutions; it is bad for growth. There is a
consensus that positive institutions lead to positive income and growth effects, and poor
institutions and corruption are bad for growth (Azariadis and Stachurski, 2005; North, 1990;
Easterly and Levine, 1997; Hall and Jones, 1999; Rodrik et al. 2002; Knack and Keefer,
1995; Acemoglu et al. 2002 and 2005). The theory behind this is that worse institutions will
increase uncertainty and cost of investments, lowering the incentives to invest and ceteris
paribus slowing down the rate of capital accumulation and this relationship holds
empirically (Gyimah-Brempong, 2002; Kaufmann, Kraay and Mastruzzi, 2003). This
relationship may be affected by poor property rights also. Poor institutions also create scope
for opportunistic, myopic government behaviour which jeopardizes long term efficiency.
Empirical evidence strongly supports the income and growth effects of institutions, but can
be sometimes clouded regarding the role of democracy in these relationships, so allowing us
to speculate that gender inequality in political voice and representation may too be an
important part of these interactions and a key moderating variable on the effect that gender
inequality has on institutions; and institutions on growth.

Institutions also have indirect effects on economic outcomes, which are termed as
conditionality effects. An important factor in the determination of economic and social
outcomes is the level of public sector efficacy. Weak institutions and corruption heavily
undermine public sector efficacy, and more effective public spending in areas such as
education and health is commonly much higher in higher income economies with better
institutions. Given that women have an increased tendency towards more social policies and
investment in future human capital, we can use Figures 4.1 and 4.2 to speculate that gender
100

inequality may be a contributing factor to this conditionality effect. The relationship is

confirmed in Figure 4.11, which shows gender equality also positively correlated with
government effectiveness. Better institutions guarantee the efficiency of policy design,
implementation, and monitoring, as well as allocative efficiency. Aside from public sector
effects, institutions also yield conditionality effects through areas such as natural resources,
aid, and conflict (Knack, 2001).

The effect of natural resources are conditional upon the quality of institutions in place, as
better institutions provide the government with control over the resulting revenues, which
can then be used to govern and invest in public goods, redistribute income and drive growth
(Lane and Tornell, 1996) therein contributing towards political order. This is of relevance
because natural resources have historically been managed and worked by men, who are
therefore responsible for most of the rent-seeking behaviour commonly associated with
natural resources. The analysis in this chapter may then help serve as some preliminary
evidence as to whether gender inequality is also an indirect determinant of the extent to
which natural resources are more or less of a curse for economic and social development.
Moreover, it is the often young men who make up the lions share of organized militants in
conflict zones (Collier, 2008), and weak institutions will make it easier for such rebels and
terrorists to organize, increasing the risk of civil war. Conflict over the rents from war
dividends can then slow institutional development further and lead to a vicious cycle of
delayed institutional reform (Collier and Hoeffler, 2005). As mentioned in Chapter Three,
gender inequality has been proved to be associated with increased violence and conflict
(Mukherjee, 2007; Sen, 1999). It may be partially explained by this theoretical conditionality
effect and the hypothesized relationship between institutions and gender inequality.

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Distributional Effects

Women in developing countries are systematically less politically connected than males, and
have for a long-time struggled to get access to credit and capital. Poor institutions make it
more difficult for less politically connected groups to access investments opportunities,
through the provision of licences, credit and other necessary barriers. Such distributional
inefficiencies result in a more unequal distribution of profitable opportunities, income and
development outcomes, underwriting and strengthening gender inequality. This typically
hinders any positive effects that gender equality may have on institutions by reinforcing the
status quo. Further to this point, poor institutions increase this income inequality and poverty
(Abed and Gupta, 2002; Gyimah-Brempong, 2002), and also tend to hit the poor
disproportionately worse than they do the rich (Gyimah-Brempong, 2002). If women are
more disempowered than men and face an increased likelihood of poverty, institutions and
gender inequality will be reinforcing of one another and exhibit strong bi-directional
causality. Furthermore, because entering the rent-seeking sector requires significant initial
political or financial capital, increasing returns in the rent seeking sector relative to the
private sector will lead to increasing inequalities between the rich and the poor, or men and
women. While this is important, it is the inverse relationship with which I am concerned; the
effect of gender inequality on institutions.

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Gender as a Determinant of Institutional Quality

The theoretical and empirical findings enumerated above illustrate how important
institutions are in successful economic development and growth. It is therefore important to
move further back along this chain to determine what exactly determines institutional quality
which differs so much between countries. There are a number of key determinants
prevailing in the institutions literature, and gender inequality in institutions had not been
studied in institutional economics4 before 2001. It is still not widely regarded and cited as a
fundamental determinant of institutional quality. Some determinants which are widely
accepted and cited include colonial heritage (Acemoglu et al, 2001), legal origins (La Porta
et al, 2004), natural resource abundance, and aid dependency. These first two are historical
ones, and since we are investigating if gender inequality is a determinant too, lets consider
gender in such history. In colonial times, women were not entitled to economic
independence because it would undermine the males role as their superior (Terborg-Penn et
al, 1989). Regardless of these two determinants of colonial heritage and legal origin, gender
inequality was instilled in many countries whether the institutions were extractive or
settlements, so we would not so much expect gender inequality to be correlated with them.
Weaker institutions have also been found to be a result of ethnic fractionalization because it
causes a more socially polarized society, in which interest groups will then engage in
lobbying and rent-seeking behaviour (Easterly and Levine, 1997), but like the colonial
heritage and legal origins, ethnic fractionalization does not occur down gender lines. As a
determinant of institutional quality, we can expect gender to not be correlated with most of
these factors, apart from perhaps natural resources abundance for the reasons previously
elaborated.
4

It has not been studied in an economics journal. There is extensive research in the broader social sciences, but
lack an economic framework or empirical testing.

103

Theoretical explanation of why gender inequality may be a key determinant of institutional

quality can be found in the field of behavioural economics. The basic consensus from this
literature is that men are more individually oriented and selfish than women (Dollar et al
2001). Women have been found to be far stronger advocates of ethical behaviour and
exhibit higher levels of integrity than men (Glover et al, 1997; Reiss and Mitra, 1998; Ones
and Viswesvaran, 1998), which implies that when in positions of governance they would be
less likely to condone corruption and rent-seeking behaviour. Furthermore, from a public
policy perspective, female leadership is implied to increase social welfare for a number of
reasons, including;

Women behave more generously when making economic decisions (Eckel and
Grossman, 1998); and

Women are more likely to try account for the interests of women, families and children
(OECD, 2008).

Women are more likely to exhibit helping behaviour (Eagly and Crowly, 1986); and

Women are more likely to cast electoral votes based on social issues (Goertzel, 1983).

As previously discussed, institutions do have an effect on gender and income inequality

through the distribution effects. But what effect does initial distribution and levels of gender
equality have on institutional quality? In the institutional literature the determinants are
implicitly related to gender inequality, whether we look at rent-seeking interest groups in the
resource sector, or colonial heritage and histories of slavery and gender inequality embedded
in the initial formation of institutions. Interest groups, resource extraction, and much
colonial Western history and colonization display a balance of power highly skewed towards
the men, and under this logic it is of great interest to determine and study the relationship
with gender inequality, as it may impact heavily on these determinants.

104

Nevertheless, behavioural economics theory suggests that female behavioural patterns may
actually have a direct positive effect on institutions. This direct effect would then be stronger
than any indirect effects enumerated above, and possibly be the causal factor. Gender
inequality around the world is still highest in politics compared to other areas like labour
markets, education and health (World Economic Forum, 2009). From a policy perspective
we want to know whether improving gender equality outcomes will improve institutions and
therefore socioeconomic outcomes through the three key transmission channels previously
adduced. In other words, to what extent are the socioeconomic development benefits of
gender equality uncovered in the last two chapters of this project actually derived from the
conduit of institutions, if at all?

4.3. CRITICAL LITERATURE SURVEY FINDINGS

For almost 20 years, feminist economists have attributed persistent corruption to the rentseeking behaviour of men who wish to maintain gender inequality in institutions and social
structures which allow the prevalence of their privileged economic positions (Sen 1990;
Agarwal, 1997; Purkayastha, 1999; Braunstein, 2008). When acting collectively males can
create and then perpetuate such social and formal institutions which are of benefit to them,
but are socially and economically quite costly (Berik et al, 2009). These male-dominated
institutions reinforce and exacerbate gender inequality, which then strengthens the rentseeking and corrupt behaviour. Feminist scholars and political scientists also cite that
governments remaining male dominated can explain much of their poor functioning and lack
of responsiveness (Staudt, 1999).

105

More recently, the OECD has found that when women do participate in governance
activities, there is an increased likelihood that policies will reflect the needs of all of society.
They bring different perspectives into the decision-making process, and a lack of female
representation limits the effectiveness of the state, policies, and representational quality
(OECD, 2008). Furthermore, the UNDP (2007) reports many studies showing that the
overall quality of governance tends to rise and corruption decreases when women are well
represented in decision-making bodies.

The Engendering Development report was the first highly influential piece bringing gender
into mainstream development, and development economics. It made reference to two
seminal papers, which were groundbreaking studies and labelled as forthcoming at the time
of the report, and these papers have gone on to be the key pieces on the topic of gender
inequality and institutions in economic circles. These papers empirically support the
previous claims by social scientists and feminist economists, and have been followed by
more recent and critical studies which cast doubt on the initial 2001 institutional consensus.
We will focus on these two important papers to begin with, and then survey the more recent
papers; attempting to synthesize both arguments.

4.3.1. WOMEN ARE OFFICIALLY THE FAIRER SEX IN 2001

Both published in 2001, the papers support the hypothesis that gender inequality may indeed
be harmful for institutions. The first is by Dollar, Fisman and Gatti and titled Are women
really the fairer sex?, and the second is by Swamy, Knack, Lee and Azfar, titled Gender
and corruption.

106

Following the behavioural theory studies mentioned in the previous section, these studies
were the next logical step in the study of gender inequality and governance, and it is
surprising that such models were not presented sooner.

To quote Dollar et al (2001) further quoting Professor Vladimir Tishkov in 1993:

Women bring enriching values (to government), and they rarely succumb to
authoritarian styles of behaviour and prefer not to maintain the sort of expensive entourage
which often accompanies high-placed (male) officials. Finally, the presence of women in the
higher echelons of the hierarchical structures exercises an extremely positive influence on
the behaviour or their male colleagues by restraining, disciplining, and elevating the
latters behaviour.

A priori, women in parliament and corruption have a very high negative correlation of - 0.38
and, consistent with our previous theories, stylized facts and literature surveys, both are also
correlated with per capita income as a proxy for the level of development (Dollar et al,
2001).

Dollar et al (2001) regress the proportion of women in parliament on the International

Country Risk Guides corruption index, controlling for the level of socioeconomic
development and level of political and civil freedom. These are controlled for because both
socioeconomic development and political freedom levels are expected to affect corruption
and the political opportunities available to women. This corruption index actually takes
higher values for less corrupted countries, and, it is found that the proportion of women in
parliament is significantly positive at the 1% level, with one standard deviation increased in
107

the proportion of women in parliament resulting in a decline in corruption of 20% of one

standard deviation. The findings that more female parliamentarians results in lower
corruption is robust in that when outliers are eliminated, there is an even larger effect, and
when the model specification is altered to different models and controls, the outcome is
barely affected. Estimation using the World Competitiveness Reports Corruption Index
produced almost identical results.

The paper by Swamy et al. (2001) produces almost identical results to that of Dollar et al
(2001) on the representation of females in government and lower corruption, but they go a
step further. They show the effect of women and gender equality in the private sector, and
then provide an analysis of the behaviour of both sexes. They find gender differences in
corruption may be attributable to socialization, networking, and knowledge, among other
factors, and that men are more likely to choose options which are the equivalent of defecting
in a prisoners dilemma. Women are less likely to condone corruption and women managers
are less involved in bribery (Swamy et Al, 2001). Using different data sets, the authors find
that greater female participation in both the private job market and the public sector is
associated with lower levels of corruption. In regressions analysing propensity to accept and
partake in bribery, the coefficient on the male gender dummy variable was negative and
statistically significant at the 1% level. The likelihood of a female response stating that
accepting a bribe is never justified is almost 5% more likely than that for a man and this
occurs with utmost consistency.

While the regressions in these studies are quite simplistic in the sense that they are OLS
estimates with just a few explanatory variables, they still present strong evidence that
although increasing women in government and the private sector should be valued for
reasons of equality and poverty alleviation, it is of even greater value for society at large
108

with great efficiency payoffs resulting from improvements in institutions. If women are truly
less likely to behave in an opportunistic manner, their participation will generate positive
externalities in public policy, better institutions and increased aggregate social welfare. Since
the status quo of a developing country is to typically not have very many women in these
positions, moving more women into such positions is the same as reducing gender inequality
in these institutions.

4.3.2. LIMITATIONS AND COMMENTS ON THESE STUDIES

Firstly, the Dollar et al (2001) paper does clearly admit possible spurious correlation. The
results do not hold when their corruption index is switched with the German Exporters
Corruption Index, and different specifications with this index. There is sufficient evidence to
say that some kind of relationship between female participation in parliament and corruption
does exist in their sample, but there is some ambiguity as to which other factors may be
partly responsible for the results. For example, all of the other variables considered GDP,
civil liberties, schooling, openness, ethnic fractionalisation, regional dummies, colonial
dummies and legal originare also highly significant. Let us also note that corruption, by
definition, is quite difficult to detect. It is often self-reported, and it is highly likely that the
results may even reflect a gender gap in acknowledgement of corruption, not actual
incidence so there may some measurement issues. The second paper uses several different
data sets and they show a male tendency of increased likelihood to partake in and condone
corruption (Swamy et Al, 2001), but like the Dollar et al paper, the sample is mostly Western
countries.

109

Furthermore, since the study does use cross-country data, there may still be an unobserved
variable which is causing increased female participation and lower corruption although the
authors did try to mitigate for such spurious correlation with their controls and different
specifications. Possible ways to improve the methodological issues are as follows;

Use both fixed effects and random effects panel data models to see if the results
differ;

Include developing countries and non-western countries in the sample;

Use interacting culture variables;

Use dummy variables for geographic continent;

Use lagged values, or change in values to try to establish some kind of causality.

There are certainly problems in guaranteeing the robustness of the results, but due to the
level of significance and coefficient magnitudes of the main regressions, these studies have
been still highly influential5. Swamy et al (2001) do acknowledge that culture may be
responsible for gender differentials in tolerance for corruption, and note that it is worth
investigating whether these gender differentials persist as females participate more in the
labour market, and society changes. They did find that gender differentials are generally
expected to persist in the medium term and any quick change in gender equity may not
directly translate to equitable outcomes because (Swamy et al, 2001);

OECD countries with greater participation still exhibit gender differentials (OECD,
2008);

I would also speculate that this level of influence can be attributed to the prominence of the authors, their
highly embedded contribution to Engendering Development, and the gender policy push by almost all
United Nations bodies which followed this report.

110

Controlling for employment status in an analysis, gender differentials persist (Swamy

et al, 2001); and

Criminologists have long assumed that increased gender equality would lead to
gender equalization in US crime rates, but there was little change amidst the progress
(Swamy et al, 2001).

4.3.3. POST-2001 LITERATURE

Indeed, these theoretical and methodological limitations outlined in the previous section are
a serious problem if we are to critically examine these papers and attempt to come to a
definitive conclusion. Since 2001, there has been little evidence in support of these two
papers findings, and some strong criticism (Goetz, 2007; Vijayalakshmi, 2008; Alatas et al
2009). These newer papers are highly critical of the 2001 studies and discredit the robustness
of the results, arguing that the hypothesis of female participation in parliament lessening
corruption does not hold universally.

In a rather critical discussion-style paper, Goetz (2007)6 writes about how the authors of the
2001 studies work for the largest aid donors and the effect this has on the statistical
outcomes. Goetz says how the 2001 findings are explained by the fact that the study looks at
liberal democracies, and such democracies are less corrupted than less liberal regimes
regardless of the level of gender inequality (Goetz, 2007). Consistent with the previous
theoretical background, she discusses the political economy of gender and corruption and
mentions the way women are generally excluded from male-dominated patronage and power

Anne Goetz is the Chief Advisor on Governance, Peace and Security for UNIFEM.

111

networks in political parties and power bureaucracies, ending her paper with this powerful
quote:

Investing in the myth of womens incorruptible nature instead of investigating the reasons
for that behaviour will postpone the institutional reform necessary to a transformation of
public institutions in the interests of gender and social equity.

Alatas et al (2009) point out in their discussion that the Dollar et al (2001) and Swamy et al
(2001) studies primarily look at Western countries. In fact, not a single country from the
African or South American continents was included in their respective samples. Alatas et al
(2009), like Swamy et al (2001), studied whether women were more likely to partake in
bribery or not condone corrupt behaviour, and the study did have similar results to the 2001
studies. Women in the only Western country (Australia) were indeed less tolerant of
corruption than men. On the other hand, in the three non-Western countries studied
(Indonesia, India and Singapore), there were absolutely no significant gender differences.
Vijaylakshmi (2008) looks at this relationship between gender and corruption in India more
specifically. Nearly 40% of the electoral positions in the institutions of India are occupied by
women, and using a Logit model this study found that there is no significant gender
difference in attitudes towards rent-seeking of actual corruption between genders
(Vijaylakshmi, 2008). These studies do indeed cast some doubt on the previous consensus
and suggest that the gender differences in corruption may not be as universal as previously
stated. The gender differences in corruption may actually be culture specific, for example;
Gneezy et al (2007) find that - what was once binding - male and female attitudes towards
competition are completely reversed in patriarchal and matriarchal societies, respectively.

112

The key criticism of these papers on the 2001 papers is the limited capacity brought about by
the incomplete sample and other variables such as culture. These are valid concerns, but
these papers certainly do not address them by simply providing convincing rhetorical
criticism. Their studies use a far smaller sample with a maximum of three countries, which is
hardly enough to discredit the previous work. Dollar et al (2001) and Swamy et al (2001) use
far larger samples, and do acknowledge the interference of other unknown variables which
may influence the results. Vijayalakshmi (2007) and Alatas et al (2009) merely select some
outlier cases (cherry-pick), proving that the Dollar et al (2001) hypothesis does not hold all
of the time and therefore is not robust. Every large cross-country regression is going to have
outliers, and some cases will indeed not hold to the stylized trend, but this does not mean
that the hypothesis does not generally hold. Vijayalakshmi (2007) and Alatas et al (2009) do
not provide a better analysis and sufficient evidence to doubt the general trends confirmed by
the 2001 papers. Goetzs (2009) discussions are more relevant, although she also cites the
limited sample size, and limited application of a one-size-fits-all approach, she focuses
more on the deeper issue; which is the complex relationships and power networks which
reinforce corrupt societies and breed inequality, and the fact that the other significant
variables are highly relevant.

113

These few studies also attempt to cast doubt on the 20 years of work by feminist economists
insisting that men collectively contribute to pervasive corruption by maintaining the social
structures which allow them to continue their privileged position and rent-seeking behaviour
(Sen 1990; Agarwal, 1997; Purkayastha, 1999; Braunstein, 2008). A valid point is indeed
that economically and socially costly rent-seeking behaviours may not arise simply because
of male gender but because they are in the positions of power and have the opportunity to
claim these rents in an unjust society. Women may be just as likely to perpetuate such
activity, and it is history and society which seems to have placed men in these positions.
There is insufficient evidence to say that this same problem would not have occurred if we
were living in heavily matrilineal societies. Instead, as speculated, the relationship between
men and women may indeed have very much in common with the relationship of the rich
and the poor in unjust societies, and theories of income equality and equality of opportunities
may be just as fitting to gender differences as they are to differences in income. Behavioural
differences with regard to corruption are attributable to the position of power and the
opportunity to capture rents. Those in the privileged positions seeking to prolong and
perpetuate their power are clearly influenced by their power and the incentives in place.
They may not be so clearly influenced by their respective gender, but as it stands corruption
tends to be more of a male issue. Instead of making a universal policy recommendation
which has been adopted by international institutions, perhaps economists should have
studied further exactly why these cross-cultural and cross-country differences persist. The
fact that the developing world is the target of most of the multilateral gender policy is a bit
alarming as no such countries were included in the studies which formed the basis for this
policy.

114

4.3.4 FURTHER EMPIRICS

The author conducted some further empirical estimation in response to the 2001 articles and
their criticisms. The key concern of the 2001 papers was the details of the sample, yet no one
has addressed this concern by running a similar estimation with a larger and more diversified
sample. I have amalgamated a number of different data sets7 and executed a regression
specification similar to Dollar et al (2001) in order to confirm whether or not the results will
differ upon using a larger sample of more recent data. As stated at the beginning of the
project, this is just some preliminary evidence and not to be taken as definitive as two main
econometric problems are not addressed - endogeneity and other omitted variables.

To address the concerns of Goetz (2007), Vijayalakshmi (2007), and Alatas et al (2009), I
ensured that my sample:

Always had a minimum of 161 countries;

Included liberal democracies, not-so liberal democracies, authoritarian states,

socialist states and everything in between;

Included countries from every continent;

Included countries with different cultures, religions, and ethnicities.

My data has been drawn from a wide range of sources, and a more detailed description of the
variables and their sources can be found in Appendix A, with the raw data in Appendix Two.

See Appendix Two for complete data sets

115

As the principle measure of corruption, I used the Control of Corruption Index (CCI -denoted as controlcorruption) from the World Banks World Governance Indicators (WGI)
database. The Transparency International Corruption Perceptions Index (CPI) was also used
as a dependent variable in order to confirm the robustness of my results amidst concerns that
the dependent variable for Voice and Accountability may cause problems, as it is also from
the WGI database. Both of these indices rate high corruption with a low figure and low
corruption with a high figure, so positive coefficients represent a positive change in the
explanatory variable corresponding to lowered corruption.

As corruption and gender inequality tend to decrease with economic development, the log of
per capita GDP has been put in the model to proxy control for the level of economic
development. The percentage of parliamentary seats occupied by women (parlfem) was the
key explanatory variable. Voice and Accountability and Civil Liberties were also included as
both factors - which are quite similar - are highly related to gender inequality and corruption,
and their neglect would lead to an omitted variable bias in the estimation. They both come
from different sources: the World Bank, and Freedom House, respectively. As the effects of
gender inequality on policy decisions are expected to take effect in the medium to long term,
a simple change has been made to the Dollar et al (2001) model. The explanatory variables
have been lagged by six years to imply some possible medium-term causality and allow the
explanatory variables to actually take effect. Explanatory variables were from 2000, and the
corruption dependent variables are from 2006. The model was also estimated with just 2006
data and produced very similar results.

116

My basic estimation was:

 







 
 
  


!
"




#
;

where i represents each country and X represents the measure of voice and accountability or
civil liberties.

Table 4.1 shows the findings of this analysis and the variant specifications, with the
coefficients listed in the columns for each regression. Table 4.2 shows the findings using the
Transparency International Corruption Perceptions Index to check the validity of results
across different measures of corruption. In every single OLS regression conducted the
coefficient for the percentage of women in parliament is positive and significant at the 5%
level, and often at the 1% level. Every model was overall significant at the 1% level when
subject to an F test, and the basic estimation resulted in a moderately high R squared value of
0.715, indicating that almost 72% of the variation in the control of corruption index is
represented by the basic model.

While this analysis is only preliminary and not very rigorous, there is sufficient evidence to
say that the Dollar et al (2001) conclusions do hold, and higher numbers of females in
parliament are indeed associated with lower levels of corruption when considering a larger
and more diversified sample. While the criticisms of sample size were valid at the time,
when these problems are addressed empirically the results do not differ, so these concerns
can be discarded.

117

Table 4.1 OLS Estimates using WGI Control of Corruption Index

Dependent Variable: Controlcorruption

1

Constant

-0.527***

-3.595***

0.763

2.647***

2.428**

1.595**

2.449**

1.288

Parlfem

0.031***

0.021***

0.017***

0.011**

0.012***

0.013***

0.0199**

0.011**

0.425***

-0.740**

-0.947***

-0.900***

-0.796***

-0.924***

-0.675**

0.076***

0.084***

0.08027***

0.070***

-0.082***

-0.060***

-0.195***

-0.179***

logGDP
logGDP squared
Civillib
Voiceaccount

-0.157***

0.030

0.339***

0.150

Voiceacc*parlfem

0.013***

Civillib*parlfem
R2

-0.002
0.095

0.566

0.600

0.715

0.716

0.661

0.717

0.678

F stat

18.898***

109.487***

84.192***

102.334*** 81.209***

80.373***

82.176***

69.126***

182

171

171

168

170

168

170

* Denotes significance at the 10% level

** Denotes significance at the 5% level
*** Denotes significance at the 1% leve

167

All decimals have been rounded off to three decimal places

Please refer to Appendix One for detailed explanation of variables
Please refer to Appendix Two for raw data tables

118

Table 4.2 - OLS Estimates using Transparency Internationals Corruption Perceptions Index

Dependent Variable: CPI

1

Constant

2.930***

-3.381***

6.636***

10.264***

9.995***

8.273***

9.776***

7.580***

Parlfem

0.068***

0.046***

0.036***

0.022**

0.024**

0.026**

0.045**

0.023**

0.893***

-1.788***

-2.139***

-2.082***

-1.878***

-2.090***

-1.62***

0.174***

0.186***

0.182***

0.162***

0.181***

0.140***

-0.400***

-0.388***

logGDP
logGDP squared
Civillib
Voiceaccount

-0.302***

0.013

0.693***

0.250

Voiceacc*parlfem

0.030***

Civillib*parlfem

-0.006

R2

0.106

0.571

0.614

0.696

0.696

0.665

0.699

0.684

F stat

19.950***

107.010***

84.911**

90.072***

70.881***

78.465***

72.49***

67.96***

171

164

164

162

161

163

162

163

* Denotes significance at the 10% level

** Denotes significance at the 5% level
*** Denotes significance at the 1% level

All decimals have been rounded off to three decimal places

Refer to Appendix One for detailed explanation of variables
Refer to Appendix Two for raw data tables

119

Furthermore, Civil Liberties and Voice and Accountability are also significant at the 1%
level when included alone in the regressions, but Voice and Accountability loses
significance when included with Civil Liberties, indicating they may account for much of the
same effects. It is interesting to note that when these variables are interacted with women in
parliament, the interaction between voice and accountability and women in parliament is
very strong and significant at the 1% level, whereas the interaction between civil liberties
and women in parliament is insignificant. This may be worth further investigation.

While these results are not definitive and only intended to provide a better understanding of
the discourse in the literature, the lagging of the explanatory variables in my estimation does
imply some degree of causality, but cannot be confirmed. Further study would need to be
conducted to confirm causality, better understand the role of the other important variables
such as voice and accountability and civil liberties, and address the endogeneity issue which
is clearly a problem. Until then, there is sufficient evidence to confirm that higher numbers
of women in parliament are indeed associated with lower levels of corruption and improved
governance, while we cannot make any definitive inferences on the extent to which they
cause this lowered corruption, or if it is caused by some other unknown variable.

120

4.3.5. CHAPTER SUMMARY

To conclude this chapter, we unfortunately cannot provide concrete evidence of the extent to
which gender inequality causes improvements in institutions through lowered corruption. It
is clear that gender inequality in political structures, as proxy by the presence of women in
parliament, is highly associated with lower levels of corruption, and can be classified as a
key determinant of corruption. However, it is also clear that there are many other factors
which affect institutions, and many of these different factors, including gender inequality,
are endogenously determined.

We do certainly know that institutional improvements have positive effects on

socioeconomic development. To what extent these institutional improvements are brought
about by gender equality highly ambiguous, as is the extent of how much of the gender
equality improvements in growth and social development are captured by the conduit of
institutions. From institutional theory at the start of this chapter we can state that income
inequality is bad for institutional development, and income inequality can often be highly
representative of gender inequality. There is not only a high raw correlation between the two
variables, but gender inequality is also a highly significant explanatory variable at the 1%
level when regressed on gender development, as shown in table 4.3.

Table 4.3 Simple OLS estimate of Income Inequality and Gender Development
Dependent Variable: GDI
0.9227***
Constant
Gini
-0.0060***
0.07
R2
F-test p-value
0.00
N
104

121

For the last decade a key focus of development and international organisations has been on
gender equality: to drive growth, to improve governance, to reduce poverty, to do basically
everything. While the poverty, growth and social development effects of gender inequality
are quite clear and strong, the same cannot be said for institutions, governance and
corruption. There is a clear association between gender inequality and improved institutions,
but the actual causality is still ambiguous as it is still simply linked back to the behavioural
traits of each gender. The policy consensus towards gender equality which was largely
driven by the World Bank addresses how gender inequality is harmful towards governance.
It is clear now that the studies and statistical evidence which propelled this policy consisted
of a biased sample consisting mostly of liberal democracies, not the countries which policy
would actually be targeted - developing countries. It may have been a case of the study
saying what the publisher wants it to.

Since this big gender push, there have been studies released which cast doubt on the findings
that women are less corrupt than men, indicating that; corruption propensity may indeed be
more of a cultural issue, cross-country differences may have been underestimated, and there
is not yet a universal answer to whether male or female is the less corrupt sex around the
world. I addressed these sampling concerns in my estimation and found that gender
inequality is indeed associated with higher levels of corruption across a sample including all
cultures, continents, religions, types of government and stages of development, but this is a
general trend with many outlier cases and is not a universal answer. The specific
circumstances of each target country must still be considered when making policy decisions.

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Recent literature points out that male or female propensity to corruption can no longer be
interpreted as binding evidence that gender inequality is bad for institutions, but there may
be other relationships which are more important. For example, good institutions are often
represented by and correlated with increased political voice and civil liberties, and reduced
gender inequality is also representative of increased political voice and civil liberties. This is
confirmed by my own analysis. In particular, empirical evidence shows that increased
womens social and economic rights are associated with lower corruption (Kauffman et al,
2003). There is insufficient evidence to state that gender inequality is bad for institutions
simply because it discriminates against women and women are less corrupt and fair than
men, although this is what some studies would lead us to believe. However, we can say that
the improved political voice, civil liberties, increased participation in governance and overall
female empowerment brought about by improved gender equality are good for institutions.
There is certainly no reason to even suspect that gender equality is bad for institutions.

Integrating gender equality into institutions is not a simple process. A 2008 OECD report
enumerated several problematic barriers to women in governance, and they are as follows:

Historically male dominated;

Harmful female stereotypes about womens leadership capabilities;

Public sector leadership tends to mirror private sector leadership;

Men tend to have more experience and self-confidence in the political realm;

Women may have limited understanding of political processes;

Women may not have time due to their double roles in the household.

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Furthermore, the current consensus regarding institutional reform implies that market-based
institutions are the key to prosperity and development. These market-based institutions tend
to reinforce the current social structures and gender imbalances, and it is likely that policy
makers may neglect some important considerations when designing institutional reforms in
both developing and developed countries (Swamy et Al, 2001), neglecting to address the
roots of both corruption and gender inequality.

Nonetheless, the gender policy push has already made its mark. Many countries are adopting
quotas of male and females in the private and public sector to remove corruption and
promote efficiency. France now requires all political parties to field equal numbers of male
and female candidates by law. In Mexico and Peru in 2001 the police chiefs took ticket
writing authority away from the citys 900 male traffic policemen, replacing them with
women to try and weed out corruption (Swamy et al, 2001). Even the Australian media and
government are pressuring private companies to have equal numbers of women on the board
for the sake of improved corporate governance (AFR, 2010). There is insufficient evidence
to universally state that women are less prone to corruption, and to support forced policy
outcomes on this assumption. Increased female presence is indeed associated with lower
corruption, and they are certainly a powerful contributory factor in the determinacy of
corruption, but there are many other key determinants. Gender inequality is more likely to
affect these other determinants directly, like civil liberties for example, than directly
influence corruption levels because of female behavioural traits. The focus should be on
gender equality in institutions for the sake of inclusive governance and overall equality of
opportunities, less discrimination, and fair civil and political liberties for all -- not because
one gender is rumoured to be ethically superior.

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Gender equality is indeed associated with improved institutions, although probably not for
the reasons we once thought. There has been a fall in corruption as many countries increase
gender equality in parliament, and this institutional improvement is directly representative of
more equitable political opportunities provided to these women, and to more equitable
societies (OECD, 2008), not a superior gender. This is consistent with our previously cited
theories about inequality and corruption. The mechanisms of transmission from gender
inequality to corruption are well represented by these theories of income inequality and
corruption, and women are indeed often underrepresented and face the same circumstances
as the poor in these models.

These women who are now in government tend to place a far greater emphasis on social
welfare, legal protection and transparency throughout the public and private sector. They
also tend to introduce more socially-oriented legislation, such as social security, education,
land redistribution and labour rights (IPU, 2008), and are passing more laws which benefit
families, women, and traditionally marginalized groups (OECD, 2008). We can speculate
again that this pro-poor, education and health focused style of policy will have positive
effects for socioeconomic development so indirect effects will indeed by yielded by
reducing gender inequality in institutions.

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CHAPTER FIVE:
DISCUSSION AND CONCLUSION

126

5.0. SUMMARY OF THE PROJECT RESULTS

From this extensive survey of relevant literature and empirical trends, there is a general
theme that gender inequality is generally directly harmful for socioeconomic development,
and indirectly harmful through institutional effects.

On growth, the net effect of gender inequality is quite unclear; it can be a major obstacle to
growth or only circumstantially promote it. It depends on the type of gender inequality, the
specific economy, and which transmission mechanisms are considered. Wages and income
are quickly affected and can change aggregate demand. These gaps in wages and income
determine the incentive systems which shape investment in human capital, which in turn
determines growth. Gender gaps in education are detrimental to long term growth, due to the
large positive externalities generated by female education, improved parental human capital
transmission and lowered fertility. Gender inequality in health and life expectancy deter long
term growth and productivity due to shortened working lives and lower productivity levels.
These health and education effects are the impediment caused by gender inequality to social
development. Female capital per worker has been shown to have a higher return than male
capital per worker, so inequality in access to capital will hinder growth and productive
efficiency. Conversely, gender inequality in wages previously promoted growth by
stimulating investment in cheap labour, but such a policy is not sustainable. It is important to
consider the circumstances in each case and which transmission mechanisms are the most
relevant to achieving a given set of growth-related policy objectives.

127

On social development, gender inequality is generally harmful, as equality improves societal

health and education outcomes, as well as generating large externalities for society as whole.
Addressing gender inequalities alone does not reduce poverty. The transmission mechanisms
discussed in this project health, education, growth, productivity are powerful tools to
address poverty, but evidence suggests that gender inequality has limited direct effect on
poverty. Gender inequality and poverty are both systemic and discriminatory, requiring a
process-oriented approach to the address forces that reinforce them.

Economic growth and social development can both be impeded indirectly through
institutions. There is a strong association between gender equality, female participation and
reduced corruption. Furthermore, institutional development is impeded by gender inequality
that is often representative of income inequality. Gender equality in opportunities is
therefore consistent with optimal outcomes in the long-term and there is no efficiency-equity
trade off to achieve dynamic efficiency. Note the terminology in that statement: equality of
opportunity. The evidence in this paper shows that equality of opportunities is optimal
particularly in health, education, labour markets, capital and credit markets, and governance.
I do acknowledge that inequalities naturally reinforcing themselves and equal opportunity
may not result in equal outcomes, but I do not have sufficient evidence to contend that
forced outcomes through direct intervention are optimal as well, and would require much
further research and rigorous testing.

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5.1. POLICY ANALYSIS

The centrality of womens roles in economic and social processes has been recognised for
some decades (Rathburger and Vainio-Mattila, 2005). However, it is only in the last decade
that gender equality has also been established as a central economic issue in development,
and the practice of gender mainstreaming has become truly common. It is now safe to say
that gender is at the centre of much policy and many programmes in the private and public
sector, and at the local, national and international level, although there will always be critics
saying that gender issues are still marginalized and that there is a gap between the rhetoric
and what is actually practiced (Sohal, 2005).

In Australia, gender equality is prominent in the media currently, with mounting pressure on
the private sector to raise female participation quotas at senior levels, and our current
parliament comprising over 30% women. On the international front, AusAID manage our
development efforts with gender equality as a guiding principle (AusAID, 2009).

More specifically, AusAIDs specific gender policy goals are to:

Improve the economic status of women

Promote equal participation of women in decision making and leadership, including

in fragile states and conflict situations

Improve equitable health and education outcomes for women, men, girls and boys

Ensure gender equality is advanced in regional cooperation efforts (AusAID,

2009).

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Note that these carefully worded policy goals are consistent with this project, focusing on
participation and not interfering in market processes. They however do suggest intervention
with respect to human capital, but cite equity for all. Given that health and education are
arguably both public goods subject to failure in their provision, this is still consistent with
the logic of not forcing any outcomes, and improved gender equity there is indeed consistent
with our findings on social development and long-term economic growth.

At an international level, the United Nations have a number of agencies dedicated to gender
equality and integrated gender into many other established departments. 2009 marked the
30th anniversary of the Convention on the Elimination of All Forms of Discrimination
against Women at the UN, and there is clearly policy consensus against gender inequality,
consistent with those here in Australia. At the higher international economic institutional
level, namely the IMF and World Bank, gender equality is also now a mainstream concern.
Consistent with this economic project, the World Bank (2009) website states that:

The empowerment of women is smart economics. Studies show that investments in women
yield large social and economic returns; and The World Bank is working to increase
womens economic opportunity by investing in better access to jobs, land rights, financial
services, agricultural inputs and infrastructure.

In 2005 at the World Congress in Vienna, the IMF rules were changed to increase the
participation of women in all IMF structures and the IMF Action programme. The IMF has
also released policy working papers acknowledging and discussing the macro-economic
importance of gender inequality (Stotsky, 2006; IMF, 2007), with gender being used as a key
topic on international economic forums (IMF, 2007; IMF, 2005).

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5.2. PROJECT IMPLICATIONS AND POLICY RECOMMENDATIONS

The economic effects of gender inequality are now well recognized, despite the lack of a
specific and extensive body of research and literature. I have been able to draw some
definitive policy recommendations from the research conducted in this project, but there is
still much to understand if we are to act effectively and decisively.

International development practitioners have adopted the policy of gender mainstreaming,

but despite this involving both sexes by definition, there is a recurring and persistent focus
on women. In advanced economies, women are now more educated than men and male
tertiary enrolments are declining (WDI, 2009), meaning that we should expect to see a
decline in aggregate male human capital. This may be a concern, especially if men are better
at maths and technical sciences. Furthermore, the declining fertility rates of these advanced
economies has led to serious skill shortages, population shortages, and structural labour
market problems in areas such as the US, EU and even Australia. In developing countries,
while women have a disproportionate share of problems exacerbated by severe gender
inequality, there are many distinctly male problems which may not be receiving the attention
required for equitable development outcomes. The point I would like to make is that we must
establish gender equality of opportunities. It is not only in the interest of equity, but also
long-term dynamic efficiency in growth, social development, and institutional development.
This means striving to eliminate gender discrimination of all kinds; education, health, labour
markets, wages, political representation, policy making, private-sector management.
Consistent with Becker (1971), discrimination is simply economically inefficient and a
burden on competitiveness and the whole economy. Earmarking the majority of aid and
development policy action towards women is effectively discriminating against men and will
only intensify gender relations, making the goal of gender equality even more elusive. We
131

must provide both males and females with equal opportunity to choose and participate, and
then allow the competitive market to decide the outcomes. The complexities of the markets
are beyond the scope of this paper, but they are clearly signalling problems which have
prevented equality of opportunity resulting in equality of outcomes, and they need to be
properly understood before we can move on.

Chapters Two and Three stress the importance of gender equality in education and health as
both are key determinants of growth and social development. It is important to continue this
focus to reap the benefits from increased female education whilst exercising care not to
neglect mens own gender specific problems. For example, unemployed, uneducated poor
men are far more likely to engage in violence (World Bank, 2006).

As capital is more complementary to females than to males, it is important to address the

labour market, capital market and societal imperfections acting as a barrier between women
and capital in developing countries, in order to capture the expected productivity and growth
gains which are theorized to result from increased female human capital stock. It is also
important to address similar issues in advanced countries which are preventing nations from
capturing the full gains of an educated female workforce.

Consistent with the first two points and not neglecting men, gender inequality against
females may be a second best solution to men suffering severe inequality. The latter can
result in militarization and political conflict, with dire consequences for socioeconomic
development. It would be worth investigating to what extent recent conflicts have occurred
in areas where development efforts are focused on women and perhaps neglecting men. For
example, Collier (2007) discusses how a key policy on preventing war in post-conflict areas

132

is to employ young men, keep them busy, satisfied with government and unlikely to
remilitarize.

Chapter Three discussed how Islamic societies are not bound into a rigid state of high gender
inequality, although commonly associated with it. Islam is not synonymous with gender bias
against women. The inclusion of Islamic societies is recommended when addressing global
gender inequality, and, as with most developing countries, gender inequality can always
dissipate to some degree regardless of religion, geography, history, culture or other factors.

In corrupt regimes, we must ensure female participation in governance and decision-making

structures beyond a minimum point, but exercising caution with the minimum quota and
representative suitability. Addressing the barriers to female participation is most important.
Specifically, the addition of women to parliament needs to be accompanied by sufficient
civil liberties, political freedom and government accountability, which are also key
determinants of corruption.

UNIFEM (2009) states how gender equality is a powerful force to reduce poverty. They
report that it leads to feminized poverty declining, but with little discussion of the effect on
male poverty. While women perform 66% of the worlds work, produce 50% of the food
but earn 10% of the income and own 1% of the property (UNICEF, 2007), there are clear
systemic issues. This project offers clear evidence that gender equality may assist in poverty
reduction through a number of different channels, but that it cannot be expected to directly,
independently and systematically reduce poverty. It is recommended that gender equality is
never viewed as a magic-bullet solution to poverty reduction or development.

133

Gender equality is indeed a powerful economic tool for economic and social development,
requiring the establishment of opportunities for both sexes to sustain long-term growth,
economic efficiency, social development and good governance. I recommend avoiding the
popular practice of just implementing quota systems in the private-sector and in governance
until the systemic problems and dynamics are confronted and understood. Forced outcomes
through interventionist policy may well undermine the efficient allocation of labour skills
and have negative effects, but there is not enough evidence yet to state the consequences
with any degree of certainty. When there is a pressing problem of insidious corruption, it
may be worth gambling on the hasty implementation of quota systems, as the costs of
corruption could dwarf the possible efficiency trade-offs which may arise.

5.3. AVENUES OF FUTURE RESEARCH

Areas of future research have been identified during the course of this project. In the second
chapter we found that gender inequality is harmful for productivity, so it would be
interesting to investigate the extent to which this productivity can be captured in the Solow
residual/TFP. We also saw that some countries exhibit a gender inequality Kuznets Curve.
Perhaps this could be modelled correctly to see if it is an overall trend that most countries
would go through in their stages of economic development.

When studying education, there were some contradictions in the literature. Barro and Sala-I
Martin (2005) found that female education had a negative coefficient in their studies,
indicating that it was not beneficial. It would be worth further investigating why these results
were produced, and better understanding the determinants of enrolment contrasted with the
determinants of educational investment, and the similarities they share. How different are the
male and female determinants of education levels and how can we shape these incentives?
134

Conflict and political instability is brought up a number of times throughout the project.
Further investigation could determine whether reducing gender inequality by targeting
women increases political instability and the likelihood of conflict by neglecting and
dissatisfying men. Furthermore, how much does a reduction in gender inequality reduce
male and total poverty rates? Does fighting poverty by addressing gender inequality only lift
one half of gender out of poverty and not the other?

In the previous chapter, a preliminary analysis was conducted on gender inequality as a

determinant of corruption. An analysis should be conducted which can actually establish
proven causality between female participation whilst accounting for the many other
determinants of corruption related to gender inequality. It is important to address the
constant problems of endogeneity and reverse causality which plague such estimation.

Moreover, this was clearly not the only relationship which could be modelled across the
topics surveyed in this project. Gender inequality research in development economics is still
in its infancy and greater understanding may require an interdisciplinary approach, and the
crossing of different schools of economic thought. It would be an asset to policymakers and
private companies if we could effectively model the complexity of gender inequality, labour
markets and incentive systems which prevent equal opportunities from resulting in equal
outcomes. For example, complexity economics could be applied to these many endogenous
relationships in a similar style of modelling to that done in complex systems analysis at the
Santa Fe Institute in California. Understanding these societal dynamics and power structures
will allow policy makers to address the links and processes which are preventing the
progress we should be seeing.

135

5.4. CONCLUDING REMARKS

The relationship between gender inequality and socioeconomic development is complicated

beyond doubt, and has consequences far beyond common perceptions. There are many
interdependent relationships which shape outcomes, many channels through which gender
inequality passes in the economy and society, and even more variables and measures by
which to try and analyse these relationships.

I have reached the conclusion that gender inequality generally has adverse affects on all
aspects of socioeconomic development. Furthermore, there is very little evidence to suggest
that any economic efficiency vs. gender equity trade off exists - gender equality is also
gender efficient. Gender inequality is now slowly becoming recognised as an important
macroeconomic variable, but still not regarded as a major determinant of growth.

With governments worldwide, international institutions, and the private sector all paying so
much attention to gender mainstreaming and addressing gender imbalances, and since gender
inequality in development economics is still in its infancy, it is crucial that economists
respond to this demand. With ageing populations, women living longer than men, financial
crises, skills shortages, male-dominated conflict and political turmoil around the world; the
time is now to hasten research in this field and provide credible evidence for informed policy
decisions. More robust and thorough understanding of the complex relationships which
prevent gender equality in opportunity from resulting in equal outcomes is necessary to
prevent distorted incentives and imbalances from further retarding policymakers in their
efforts to achieve universal gender equality.

136

Even the most advanced economies have progressed gender equality of opportunities to a
point where it is often favourable now to be a female, and still cannot remove gender
inequality from the system. The task at hand is to develop a framework to understand and
deal with the reinforcing social and economic structures of gender inequality. We must start
to quantify and understand the productivity costs of forcing gender equality from the topdown as we are starting to see in the public and private sectors worldwide, where there may
well be an efficiency and equity trade off soon resulting from excessive intervention.

137

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152

APPENDIX ONE: LIST OF VARIABLES

Variable
GDP Per Capita
Gender Development Index as a proportion of the Human Develoment Index
Civil Liberties Index
Control of Corruption Index
Corruption Perceptions Index
Female School Enrolments
Male School Enrolments
Total Enrolments
Gender Development Index
GDP Index
Average GDP Per Hour/worker
Gender Empowerment Measure
Gini Index of Income Inequality
Government Effectiveness Index
Human Development Index
Labour Productivity Growth
Female Senior Managers and Legislators
Female Life Expectancy
Life Expectancy Index
Male Life Expectancy
Total Life Expectancy
Female Literacy Rate
Male Literacy Rate
Total Literacy Rate
Multi-factor Productivity
Female Parlimentary Seats
Poverty Rate at $1.25US per day
Poverty Rate at $2US per day
Political Rights Index
Female Technical and Professional
Rule of Law Index
Stability and Violence Index
Voice and Accountability Index
Average Female Income
Female to Male Income Ratio
Average Male Income

Eviews & Excel Shorthand

GDPPC
gdi%HDI
CL
Controlcorruption
cpi
enrolfem
enrolmale
enroltotal
gdi
gdpindex
GDPperhour
gem
Gini
govteff
HDI
labour prod growth
Legi_senior_managersfem
lifefem
Lifeindex
lifemale
lifetotal
litfem
litmale
littotal
MFP
Parlfem
Poverty1.25
Poverty2
PR
profandtechfem
rule flaw
stabviol
voiceaccount
yfemale
yfemtomale
ymale

Source
World Development Indicators
UNDP
Freedom House
World Governance Indicators
Transparency International
UNDP
UNDP
UNDP
UNDP
UNDP
OECDData
UNDP
World Development Indicators
World Governance Indicators
UNDP
OECDData
UNDP
World Development Indicators
UNDP
World Development Indicators
World Development Indicators
World Development Indicators
World Development Indicators
World Development Indicators
OECDData
UNDP
World Development Indicators
World Development Indicators
Freedom House
UNDP
World Governance Indicators
World Governance Indicators
World Governance Indicators
UNDP
UNDP
UNDP

Year
2000, 2006
2006
2000, 2006
2006
2006
2006
2006
2006
2006
2006
2006
2006
2000-2008
2006
2006
2006
2006
2006
2006
2006
2006
2006
2006
2006
1986-2008
2000, 2006
2006
2006
2006
2006
2006
2006
2000, 2006
2006
2006
2006

Details
Annual Gross Domestic Product Per Capita in US Dollars
GDI as a proportion of HDI
Range: 1-10; where 1=high degree of civil liberties
Range: -2.5 - 2.5; where -2.5 represents no control over corruption
Range: 1-10; where 1=low corruption
Percentage of female population at schooling age
Percentage of male population at schooling age
Percentage of total population at schooling age
Range: 0-1; where 0 is a low level of gender development
Range: 0-1; where 0 is a low level of income
Average GDP Per hour per person
Range: 0-1; where 0 is a low level of gender empowerment
Average of available data
Range: -2.5 - 2.5; where -2.5 represents no government effectiveness
Range: 0-1; where 0 is a low level of human development
Percentage change per annum
Percentage of legislators and senior managers who are female
Average Life expectancy in years
Range: 0-1; where 0 is a low life span
Average Life expectancy in years
Average Life expectancy in years
Proportion of females literate
Proportion of males literate
Proportion of total population literate
Multi-factor productivity coefficient
Percentage of parliamentary seats occupied by women
Percentage Incidence of poverty at 1.25 per day
Percentage Incidence of poverty at 1.25 per day
Range: 1-10; where 1=high degree of political rights
Percentage of Technical and Professional Positions Occupied by Women
Range: -2.5 - 2.5; where -2.5 represents no rule of law
Range: -2.5 - 2.5; where -2.5 represents a high level in instability and violence
Range: -2.5 - 2.5; where -2.5 represents no accountability of voice
Average annual female income in USD
Ratio of male to female incomes
Average annual male income in USD

153

APPENDIX TWO:
RAW DATA

154